Trade bodies are wrangling over how the Financial Services Compensation Scheme (FSCS) should be funded.

In March, the FSA announced four possible options for the future funding of the FSCS and will publish draft rules this autumn.

Biba has written to the FSA and forwarded a report it commissioned from analysts Europe Economics. This says there are advantages to the FSA's Option D - a widening net with sub-classes, classes and a general pool.

Biba chief executive Eric Galbraith added: "We have concerns that the applicability of the FSCS to general insurance intermediaries will be seen as an example of 'gold plating' the implementation of the Insurance Mediation Directive (IMD)."

He said the financial requirements of the IMD are already met through existing client money rules. "Given there is no EU-wide scheme for insurers or brokers, we must question the existing scheme being more onerous for brokers."

According to Andrew Paddick, director general of the IIB, none of the four funding options is viable: accept any of them. For brokers and IFAs, the FSCS is an illogical and punitive financial imposition."

The IIB wants a product levy imposed on providers, which would ultimately be paid by consumers, although he states the burden to them would be "infinitesimal".

In a letter to the FSA, he said: "Unlike the providers who factor these costs into pricing, for brokers, levies come straight off their bottom line. Product-based levies do not have be complicated and should be applied to produce an equitable way of supporting FSCS funding."

Brokers are likely to take a £500,000 hit, according to FSCS estimates - small change compared to IFAs who face a £47.5m bill.

Chris Cummings, director general of the Association of Independent Financial Advisers (AIFA) said brokers - like his members - should prepare to meet some costs. But, he wanted to see providers absorb extra cost rather than these being passed on to consumers.

"The costs need to be divided more fairly. In our case with endowments, providers continue to benefit financially, but the smallest IFAs are being asked to pay the lion's share of FSCS funding."