But they should not celebrate too hard as more change is needed
Brokers and Biba should be greatly encouraged that the FSA has heard their voice over the issue of Financial Services Compensation Scheme (FSCS) funding and, better still, acted on it.
It is testament to Biba’s hard work that brokers have been able to win this small victory, and they should be proud of their trade body for voicing their concerns convincingly and effectively.
But brokers should not sit back as there is plenty more that needs shouting about.
The FSA has now adopted most of its proposed changes to FSCS funding, which means insurance brokers will no longer be on the hook for failures at banks.
The previous FSCS structure was the cause of much frustration for insurance brokers because the payment protection insurance (PPI) mis-selling debacle resulted in higher FSCS levies for them – even though PPI was sold by banks.
Retail Pool back in the spotlight
The FSA has also decided to re-consult on its proposal for a so-called Retail Pool in the FSCS funding arrangements after what it described as ‘industry concern’ about the way it would work.
The Retail Pool was designed as a central funding pot for all types of intermediaries, including insurance brokers, that would be regulated by the Financial Conduct Authority when it starts regulating from 1 April.
Under the original proposal, all intermediary classes under the FSCS classification system would pay into a central pot. If any one of the individual intermediaries suffered a failure that breached the individual funding pot for its class, they would have access to the central pot. In other words, an extreme failure in one of the intermediary classes would be paid for by the others.
Now, however, the FSA will consult on having the other classes of companies, not just intermediaries, contribute to the Retail Pool.
This new consultation comes after Biba pointed out that under the old Retail Pool proposal, insurance brokers would be on the hook for mis-selliing of insurance products by other types of intermediaries, but the insurers themselves would not.
Brokers still face challenges
These victories should cheer brokers, and show them that time expended in sharing problems and concerns with Biba to make the market better is time well spent.
But brokers are not out of the woods yet - on the FSCS issue or on the many other challenges they face.
Biba still feels that insurance brokers need their own dedicated pot in the FSCS funding arrangements, for example, which they still do not have. Chief executive Eric Galbraith acknowleged that there was more work to be done here and that Biba would keep pushing.
As well as having a voice on regulatory matters, brokers also need to shout louder about the value they provide. With the European Commission’s Insurance Mediation Directive (IMD II) looming, which threatens to shine a light on broker commissions, brokers need to show more than ever the value they are adding to the chain and that this value is worth paying for.
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