The Institute of Insurance Brokers (IIB) is challenging the FSA over its decision to include brokers in the Financial Services Compensation Scheme (FSCS).

IIB director general Andrew Paddick said that to date he has been told by the FSA that its board have made the rule and it would not be changed.

He has since written to Callum McCarthy, chairman of the FSA, asking him formerly to reassess the rule.

Paddick said that if this move failed, he would appeal, in turn, to the FSA's complaints commissioner and the Treasury.

He said he had not ruled out taking the matter all the way to judicial review, despite the costs involved in such a step.

"This is a crucial issue, which could save the industry countless millions," Paddick said.