The British Insurance Brokers’ Association has given a cautious welcome to the Financial Services Authority’s proposals for changes to the Financial Services Compensation Scheme funding model.

The policy statement and consultation issued by the FSA means that two of BIBA’s key lobbying issues have been achieved. Brokers will no longer have cross subsidies with banks meaning they will not pay for financial failures in the banking sector.

In addition, the FSA has agreed to re-consult on the method of cross-subsidies following BIBA’s criticism that brokers would have had financial responsibility for the mis-selling of insurers’ products by other sectors, when the insurers did not.

BIBA said that these two changes are essential to reduce the future financial burden of the FSCS on brokers for areas that they are not responsible for.

Steve White, BIBA head of compliance and training, said: “We have lobbied heavily on these issues demanding a fairer scheme for brokers so we are really pleased that these two important points have been achieved on behalf of members.

“Members played an important role and their support for our petition and letter writing campaign in 2011 added weight to our campaign for these changes.”

BIBA said that although it fully welcomes these two positive outcomes, the FSA has not provided separation for brokers from other intermediaries within the scheme.

Eric Galbraith, BIBA chief executive, said: “We still believe that there is a robust case for a separate pot for ‘insurance brokers’ and we will continue to make this case to the regulator and politicians. Our report from consultants Oxera contained an alternative solution for a sustainable, affordable and equitable way to achieve this and although we are disappointed that the FSA did not find a way to incorporate it at this stage, we will continue to push for it going forward.

“With every likelihood that an interim FSCS levy will hit brokers in the coming months, this only adds to our argument that the current model is unfair and that further change is needed.”

BIBA says it will fully engage with the new consultation to lobby for the best possible outcomes for brokers. Longer term, it will focus on differentiating brokers and continue to call for separation from other intermediaries.

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