Insurers today slammed regulator plans to force the sector to foot the bill for broker and adviser failings.
The Financial Conduct Authority (FCA) today rolled out proposals to make insurers pay more into a compensation scheme designed to protect the public from financial organisations going bust.
Using a "polluter pays" model, the FCA wants City firms offering riskier products to pay more into the Financial Services Compensation Scheme (FSCS).
But the Association of British Insurers (ABI) hit out at the plans.
“The FCA’s proposal gets the balance wrong," said ABI director general Huw Evans.
[It] seems to go against the fundamental principles of FSCS funding – that those responsible for the failures are the ones who pay. Expecting providers to foot the bill for intermediaries they have no control over is entirely misplaced and will continue to be widely opposed by providers.
The FSCS was formed in 2001 and mandates that financial services firms pay a levy based on the size of the firm, rather than the risks its products expose customers to.
The FCA wants those firms that design risky financial products to contribute more towards compensation costs stemming from sales through “intermediaries”, like brokers and advisers. The aim is to put pressure on firms to make sure they scrutinise any third parties that sell their products.
“This proposal makes general insurance providers potentially liable for more of the compensation bill than before,” the FCA said.
Rich get less protection? Lloyds wealthy customers to be stripped of cash savings protection