BIBA says that the fight is not over following the Financial Services Compensation Scheme’s (FSCS) recent announcement on an interim levy on insurance brokers. The FSCS has confirmed that it will be raising an interim levy of £16m from the general insurance intermediation sub-class (SB02) for the 2012/13 financial year.

The continuing high costs and volumes of payment protection insurance (PPI) claims received by the FSCS has prompted the need to raise the interim levy on general insurance intermediaries, although this is reduced from the £20m previously flagged by the scheme in November 2012.

BIBA’s head of compliance and training, Steve White, says: “This confirmation of an interim levy reinforces our view that the funding model treats the professional insurance broker unfairly and we are continuing to pursue this matter as a major lobbying issue.

BIBA has three main areas of concern:

•The separation of professional insurance bodies from the others in our sub-class;
•The extent to which brokers are responsible for related intermediary failures;
•The ability of the FSCS to achieve recoveries in respect of failures where the film acted as agent of the insurer.

White adds: “We have heavily lobbied both Government and the FSA on this issue, however despite almost 100 ministerial and MP meetings, 54 meetings with the FSA and 49 meetings with HM Treasury on the issue – the levy is going ahead.

“It is important to remember that although levy-call letters will be hitting the door mats in the next few weeks – the war is not over and we continue to fight in our members’ interests.

“As well as opportunities to change the model through European legislation, we’re also calling on the government to launch a red-tape challenge for financial services so that unnecessary burdens to business, as this is to the vast majority of our membership, are removed.”

“Despite the levy being less than expected, it is still expected to cause brokers concern – particularly as many of the broking sub-class had no involvement in the mis-selling of PPI.

“We have long campaigned for brokers to be separated from the non-specialists in to their own sub-class. In our formal submission in response to CP12-16, a robust behavioral economic case was made for why professional insurance brokers should be separated in the FSCS funding model and an affordable and sustainable alternative model was suggested.

“We still maintain that this alternative is a more prudent and equitable solution for a sector that makes a direct and indirect contribution to UK GDP of one per cent. This contribution should entitle professional insurance brokers to a more tailored response from the regulator.”

The reduced interim levy sought reflects the unpredictability of the FSCS operating environment and the uncertain nature of claims, but the industry should be under no illusions that the level of PPI claims are on the way down. The Financial Ombudsman Service’s (FOS) plan and budget for 2013/14 shows that it continues to face unprecedented numbers of PPI cases, and it can take a couple of years for these to filter through to the FSCS.

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