Trade body continues to lobby government for an alternative funding model
One in two insurance brokers have delayed or cut investment as a direct result of growing Financial Services Compensation Scheme (FSCS) fees.
The FSCS pays compensation to consumers who have made claim against a financial services firm which cannot meet its liabilities.
Biba members have seen a 50-fold increase in their fees in recent years owing to mis-sold payment protection policies. The FSCS has raised a levy on insurance intermediaries to fund the payments, even though the policies were largely sold by secondary intermediaries such as banks.
Some 53% of Biba members said they had delayed or cut investment, while 40% have slowed their expansion plans to pay the fees.
The survey results were revealed today at Biba’s manifesto launch.
Chief executive Steve White said the trade body would continue to lobby for a sub-class within the FSCS for pure insurance brokers.
It has commissioned consultancy firm Oxera to come up with an alternative FSCS funding model that would create a separate fee structure for pure insurance brokers and secondary intermediaries.
White said: “Members continue to report the unfairness of the FSCS fees particularly in light of the fact that defaults by insurance brokers are relatively uncommon and have not given rise to huge claims on the resources of the compensation scheme, unlike other sectors.
“This research is particularly alarming and demonstrates how restricting these fees are for members, 85% of whom have fewer than 10 staff.”
New regulation research also showed insurance brokers in the UK have the most expensive regulatory regime in the world, with regulatory fees and levies costing more than five times that of those in New York, Japan, France and Germany.
The cost of regulation for small brokers has increased from 3% three years ago to 4% of income now, and large brokers pay 14 times the global average cost in comparison with other nations.
“Having the most expensive fees and levies in the world puts UK brokers at a disadvantage and is disproportionate to the low risks that they pose to the regulator’s objectives. Our new manifesto outlines our calls for action to tackle this,” White added.
The Full Cost of Regulation report will be be published in spring along with the indirect regulatory cost comparisons.