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‘Biba looking in rear-view mirror at FOS’

Aifa warns insurance brokers that no change on watchdog funding could rebound on them.

Aifa has called on the British Insurance Brokers’ Association to wake up to the damage that could be done to intermediaries if dramatic changes are not made to FOS funding.

Aifa director general Chris Cummings says Biba, which does not want any change to the current FOS system, is looking through a “rear-view mirror” and its members could feel the unfairness of the system in the future if changes are not made.

Financial Ombudsman Service spokeswoman Emma Parker says there is a wide divergence in opinions received following last year’s discussion paper and consultation process, with Aifa and Biba at opposite ends of the spectrum.

This could lead to a further consultation on the issue in the first half of this year and may delay implementation of a new regime.

Aifa is backing option H, which would allow firms 10 free cases a year with a flat annual fee of around 230 levied on all firms while case fees of 480 would be charged after the 10th complaint.

Cummings says this would address the unfairness in the system and ensure that the innocent do not pay.

But Biba considers that the insurance intermediary sector is lower risk compared with others and is concerned that the option which is being supported by Aifa would lead to its members subsidising the failings of others.

Cummings says: “Biba has a rear-view mirror outlook on this issue. Its members could well start to feel the unfairness of the current system and it needs to wake up to the fact that changes are urgently needed.”

Biba chief executive Eric Galbraith says: “We are becoming increasingly concerned at the prospect of our firms having to subsidise failings in other financial sectors.”

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