Davy: providers should pay lion's share of FSCS fees
Product providers should contribute most of the running costs of the Financial Services Compensation Scheme, Ken Davy has said.
The chairman of SimplyBiz, replying to the consultation on the FSCS’s future funding on behalf of the company, said he agreed with some of the proposals on the proviso that product providers contributed more.
He said: “We have consistently argued for many years that product providers benefit from what is essentially, the risk free distribution of their products.
“We believe, that to properly recognise the long-term, significant financial benefits, providers gain from the distribution of their products through intermediaries they must contribute the major portion of the FSCS funding costs, and not less than 75 per cent.”
In a consultation on the funding of the FSCS, the Financial Conduct Authority recommended reducing the number of funding classes to reduce the levy’s volatility.
The FCA is also considering including contributions from product providers towards the first pound in any claim.
But providers themselves have criticised this move strongly, with the Association of British Insurers saying its members had little direct influence over failures by advisers and there was "no justification" for the change.
Addressing the FCA’s proposal to reduce the number of funding classes, Mr Davy expressed scepticism.
He said: “Reducing the number of funding classes would not, of itself, address the fundamental issue of how the scheme is funded.
“By its nature, when making future predictions, there will be unforeseen circumstances and it is the excessive cost of the overall funding which creates financial insecurity for firms, rather than volatility.”
But he said there was merit to the idea of amalgamating the investment intermediation and life and pension intermediation classes since the differences for the consumer are “meaningless”.
Mr Davy was also sceptical about the FCA’s proposals to introduce comprehensive, mandatory professional indemnity insurance since it could cause underwriters to leave the market.