Industry scheme drops £20m interim levy, but initial estimate for 2010/11 is revised up by £10.9m
The Financial Services Compensation Scheme (FSCS) has blamed rocketing payment protection insurance (PPI) claims for its decision to hit brokers in the pocket for an extra £10.9m, writes Saxon East.
Brokers will have to cough up £61.4m in total – compared to initial estimates of £50.5m – for the FSCS 2010/11 levy.
In one spot of bright news, however, the FSCS has dropped its plans to charge brokers a £20m interim levy.
Biba is lobbying the FSCS to change the way it levies brokers. The trade body argues brokers should not be liable for PPI compensation payments when the bulk of the products have been sold by banks and building societies.
Biba chief executive Eric Galbraith said: “While we welcome the fact that brokers will no longer be called upon to pay an interim levy this spring, the increased burden of £61.4m on brokers for 2010/11 once again highlights the urgent need for the compensation funding model to be addressed.”
Insurers will have to fork out £41.5m to the fund, an increase of £7m on the first draft. The FSCS said the extra millions would mop up oustanding claims from failed insurers Independent, Builders Accident Insurance Ltd, Chester Street Insurance and Drake Insurance.
The total levy across the financial services industry was £148m. FSCS interim chief executive Alex Kuczynski said: “The costs of PPI, investment and insurance claims are among the main drivers of FSCS costs this year and into 2010/11. After further refining our assumptions, we have set the levy for the coming year at £148m.
“Our duty is to help consumers of authorised financial services firms that are entitled to our protection. This is good for consumer confidence and benefits the industry.”
Following lobbying by Biba, the FSCS is currently reviewing the way the scheme operates.