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Costs split agreed on watchdog

A deal has been reached between Aifa and the ABI which will see insurers

meet 85 per cent of subscription costs for the new Financial Ombudsman

Service.

The proposed split will see IFAs paying the remaining 15 per cent. The

agreement is subject to regular review under the principle of “the user

pays”.

IFAs are responsible for generating slightly morethan 50 per cent of

premium income but the split of comp-laints received by the PIA is 84.7 per

cent about product providers and 15.3 per cent concerning IFAs.

The ABI will seek members&#39 approval for the policy change which will see

the subscription element for insurance companies increase by £206,000 to

£3.5m.

Former PIA-regulated firms will initially be responsible for meeting

£8.24m, equivalent to 40 per cent of the £20.6m total budget of the new

service.

Half of the £8.24m will be payable through a subscription on all regulated

firms and the remaining half raised through case fees. As half is payable

by subscription, insurers and IFAs will be levied £4.12m. IFAs&#39 share will

be around £620,000.

The ABI has sent a circular to members seeking app-roval for devising a

“more equitable means of sharing the costs” of the service with independent

advisers.

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