Progress on EU financial services compensation directive jump-starts UK shake-up
The FSA is restarting work on the long stalled review of the Financial Services Compensation Scheme - one of the key goals of Insurance Times’ Fair Fees campaign.
The review, which started in October 2009 was put on hold last year due to concerns about the impact of the government’s UK reform of financial services regulation.
The government announced earlier this year that the Financial Conduct Authority would have responsibility for the FSCS, removing one hurdle.
But the FSA said that it could still not return to the review because of uncertainty over the future of the EU Deposit Guarantee Schemes Directive (governing financial services compensation schemes).
But this week the FSA said that there had been enough progress in Brussels for the review to restart.
The structure of the FSCS will be the focus. As well as the composition of the nine funding classes, the review will examine the levy thresholds applicable to each funding class and their tariff bases.
The FSA’s aim is to formally consult on the review in the first half of 2012. But any changes will not affect the bills for next year’s levy in June.
The existing structure, which has lumped general insurance brokers in with intermediaries that have mis-sold payment protection insurance (PPI) products, has been the key factor behind the spiralling of brokers’ FSCS levies over the past two years. A speeding up of the review is one of the key demands of IT’s Fair Fees campaign.
Biba director of corporate affairs Graeme Trudgill, speaking to Insurance Times at the Conservative Party conference in Manchester, said: “It’s been a long time coming. We’re a bit disappointed that it’s not going to happen in time for the next levy, but it’s a lot better than it happening in 2013.”
Biba has appointed consultants and lawyers to develop a formula that would enable the FSA to separate general insurance brokers from the rest of the intermediary sector.
All-party parliamentary insurance and financial services group chairman Jonathan Evans MP said he was disappointed that changes would not take effect next year.
The FSA’s announcement follows last week’s publication of its complaint statistics. Complaints about PPI have nearly trebled from 174,286 in the second half of 2009 - the first time figures were collected - to 531,667 in the first half of 2011.
We say …
● The fact that there is going to be a review is a positive step for brokers, but why the long wait? The consultation will take place in the first half of 2012, by which time brokers will have paid out even more in levies.
● Part of the reason for the delay was because the FSA was waiting for the green light from the EU. Brokers are suffering because of a vast layer of bureaucracy.
● The number of PPI claims is increasing as claims management companies spot an easy money maker.
Pass notes: FSCS fees levy
What’s the row about?
Brokers take issue with the structure of the Financial Services Compensation Scheme, because general insurance brokers contribute to the compensation made to customers of other intermediaries - and potentially, to those of banks.
That’s not fair
That’s what brokers say. The mis-selling of PPI has prompted a huge number of claims, which have in turn significantly pushed up the fees brokers have to pay towards the scheme - by as much as two or three times, in some cases.
What can brokers do about it?
Not very much - until now. There has been a sustained lobbying campaign, by Insurance Times as well as industry bodies like Biba and IIB, but the government has proved intransigent. This week’s announcement means brokers have a chance to make their case next year. Biba and IIB will collect evidence, individual brokers will contribute and of course we at Insurance Times will step up our Fair Fees campaign.