Independent tribunal called for to protect brokers from "unlimited" FSCS claims

The IIB is set to lobby the new government to create an independent tribunal with the power to quash FSA regulations.

IIB director general Andrew Paddick will call for the establishment of a body to decide whether an FSA rule is "just and equitable" and to "condemn it" where necessary.

Paddick said: "It is reasonable to have an independent tribunal headed by a judge. It would concentrate the mind of the FSA."

Paddick said the move stemmed from his concern about the operation of the Financial Services Compensation Scheme (FSCS).

He said the lack of a cap on compensation payments leaves the broking community open to "unlimited" FSCS claims.

"There is a limit set on investment business of £48,000, but none on general insurance business. That means there is unlimited liability for brokers," he said.

Unlike insurers, brokers cannot recoup the FSCS payments from customers through increased premiums, said Paddick.

"The FSA has set a minimum professional indemnity requirement of €1m. That should also be the limit on compensation payments."

Paddick said he would lobby the appropriate Treasury minister once it had been appointed by the new Labour government.

Credit card firms may face legal action
The IIB has not ruled out legal action against credit card companies in its dispute over the charging of brokers following the collapse of Independent Insurance.

The IIB is arguing that the card companies were wrong to charge brokers after they had reimbursed Independent Insurance policyholders who had paid by credit card.

IIB director general Andrew Paddick said: "We are now into legal exchanges with banks over the merchant agreements [which govern the use of credit cards].

"We would like to resolve the matter this year. But we may have to run a test case and would need to gather a fighting fund from brokers."

Paddick said that the merchant agreements used by banks "are not written with brokers in mind".

"Once the intermediary has passed money to the insurer he has completed his part of the bargain and the risk of any financial failure of the insurer passes to the policyholders themselves."

The IIB has received counsel's opinion to support this argument, he said.

"There is merit in the banks reimbursing the brokers. I also want the banks to change their merchant agreements to recognise the role of the broker," Paddick added.