The British Insurance Brokers’ Association (BIBA) has warned that brokers will see increases in June for 2011/12 Financial Services Compensation Scheme (FSCS) levies of around 50% on last year’s figure. BIBA is urging brokers to adjust budgets in order to prepare for the bills, which follow the significant increases that brokers saw last year.
The warning comes from BIBA following the FSCS interim budget publication and BIBA’s regular liaison meetings with the FSCS. BIBA has also been requesting early warnings from the FSCS for any further major increase in costs following last year’s 9-fold increases.
Eric Galbraith, BIBA Chief Executive said: “Our meetings and discussions with the FSCS have highlighted that claims on the FSCS have continued to increase because of the failure of credit brokers and their mis-selling of payment protection insurance.
“Brokers will yet again be unfairly penalised because the FSCS implementation of the rules means that our members pay for failures of credit brokers who have sold this product. This is ridiculous and BIBA is doing everything that we can to demand a fairer compensation system. We have also called on the FSCS to ensure they pursue recoveries against the relevant insurer, where it can be proven that the credit broker was acting as the insurer’s agent.”
Steve White, BIBA Head of Compliance and Training, added: “The current compensation funding model is patently unfair for insurance brokers, who present a low risk to consumers. We successfully lobbied throughout 2009 and 2010 for a review of the funding system and received this review but the recent delays in issuing the consultation paper must not be allowed to drag on. Whilst issues in Europe and on pre-funding are delaying the review, the FSA needs to ensure that the proposed 2012 completion date is not extended. It is imperative that the funding review produces changes to the rules that are effective no later than April 2012.”
BIBA continues to lobby for broker separation and no cross subsidy in the funding model. When the FSA consultation paper is issued, BIBA will launch its call to arms and enable every member to send their local MP the same messages that BIBA is lobbying the FSA and central government with.
Eric added: “This is one of the biggest issues facing brokers and when the time is right, we need to take collective action with one single message, so that those in power hear a consistent voice from the sector. We are ready to do this and are urging brokers to wait until the FSA consultation paper is issued, as we believe that lobbying jointly together, at the right time, both centrally and regionally will be the best way to achieve change.”
BIBA also believes that brokers may have to pass this cost onto customers as they have no other way to pay this levy which is being imposed upon them unfairly. This may be the only way to avoid them going out of business.
Source : BIBA Press Release
