News - FSA warned over broker levies.

(From Post Magazine)

Byline: Ana Paula Nacif.

The Institute of Insurance Brokers has threatened to take the issue of brokers paying a compensation levy to parliament if the Financial Services Authority refuses to back down over its proposal.

In its formal response to the FSA consultation paper Mortgage firms and Insurance Intermediaries: Funding of the Ombudsman and Compensation Schemes, the IIB blasted the plan as a "totally unrealistic and unacceptable" measure that could force brokers out of business.

The IIB said brokers' profits would be swallowed by the estimated annual Financial Services Compensation Scheme levy of 1.5% of gross income, which it claims is roughly twice as much as brokers already pay for their professional indemnity insurance premium. The IIB also wants the FSA to limit any single claim on the FSCS arising from insurance mediation to EUR1m (GBP668,000).

Andrew Paddick, IIB's director general, commented: "We will oppose the FSA's proposals at the highest political level and will take the issue to parliament if necessary. The level of general insurance mediation compensation should be the same as protected contracts of insurance."

Mr Paddick said that, unlike insurers, brokers are not able to pass costs to policyholders to make up for PI shortfalls faced by those with inadequate indemnity limits.