Viewpoint: Brokers being hounded over PPI

Readers of the British Insurance Brokers' Association's 2010 manifesto will note that the unfairness regarding funding arrangements for the Financial Services Compensation Scheme is a matter that Biba is lobbying to change.

The need for change is underlined by the publication of the FSCS annual plan and budget and the Financial Services Authority's consultation paper on its fees and levies. The FSCS budget for 2010-11 contains a levy of £50m from general insurance intermediaries, up from £8m in 2009-10. Additionally, there is a £20m shortfall for the 2009-10 financial year for which the FSCS will soon issue a standalone demand.

A motor broker with a £20m annual commission and fee income has told me that, over the last two years, its contribution to FSCS had increased from £3,000 in 2008 to £16,000 in 2009. For 2010, the bill would be £86,000. In addition, the call for the £20m shortfall could see it owe a further £60,000.

This huge hike in FSCS funding is caused by firms that have mis-sold payment protection insurance policies being unable to compensate customers and closing. The affected customers are then dealt with by the FSCS and the costs passed on to all firms with permission to undertake general insurance mediation activities.

Biba supports compensating consumers in the event of a firm failing but these funding arrangements are out of line with the rest of Europe: there is no other state in the EU where insurance intermediaries face any element of cross-subsidy. The FSA has started its fundamental review of the FSCS and we call upon them to amend how the general insurance mediation sub-class is structured to ensure that brokers are better protected from those that have caused the mis-selling problems.

Furthermore, we have yet to see the full effects of 2008's banking failures.