Daily Insurance Industry News
 
 
Daily Insurance Industry News
Wednesday 23rd of May 2018
August 13, 2007

FSA proposals put pressure on premiums

by Gill Montia

Story link: FSA proposals put pressure on premiums

The Association of British Insurers (ABI) is opposing plans to reform a compensation scheme for customers of financial companies that have collapsed.

The Financial Services Authority (FSA) is proposing to amend the Financial Services Compensation Scheme (FSCS), which is a statutory fund of last resort for customers of authorised financial services firms.

It is is an independent body that can pay compensation if a firm is unable, or likely to be unable, to pay claims against it.

The current FSCS scheme compensates consumers facing losses because of failed financial businesses, using funds contributed from companies in the same sector as the failed business.

However, the FSA would like to see compensation provided from funds across a number of different sectors.

This would mean that companies operating in inherently safe sectors, such as insurance, could be forced to help compensate customers of a pension company.

According to the ABI, the insurance sector is likely to pass such costs on in higher premiums.

The FSA believes that the reforms are necessary to allow the FSCS to increase its ability to deal with major corporate collapses.

 

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