Daily briefing: Wednesday - Broker levies rise 1,000%

Figures presented by the Institute of Insurance Brokers to a meeting of MPs yesterday outlined in cold, hard numbers the massive increase in regulatory fees and levies the sector has witnessed over the past two years.

They show that the average broker firm has seen its levy for the Financial Services Compensation Scheme (FSCS) rise nearly tenfold in just two years. A firm with an income of £500,000 has seen its levy increase from £419 – relatively small change in the grand scheme of things - to £4,104. Once FSA fees and the Financial Ombudsman Service levy are taken into account, the figure rises to £6,515- a significant chunk of the cost of taking on a trainee, for example.

For a broker with an income of £5m, the total cost of regulatory fees and levies works out at £58,246 – equivalent to a couple of trained staff.

Paying for others' mistakes

The chief factor fuelling the increase has been the nearly 1,000% rise in the sums being levied by both the FSCS and the Financial Ombudsman Service. In the case of both bodies, the cause of the increase is the same: the explosion in mis-selling complaints resulting from the payment protection insurance scandal. This means that the FSCS is having to pick up the tab for more compensation payments, while the FOS is handling a lot more complaints.

The figures outlined by the IIB underline how important a reform of the FSCS’s structure is, in order to ensure that insurance brokers never again have to pay the price of others’ malpractice. To add your voice for calls to reform the FSCS, sign up to Insurance Times’s Fair Fees campaign, which marks its first anniversary next week.

Top Towergate exit

The game of musical chairs in broker land continues. The day’s biggest departure is that of Towergate chief operating officer Max Carruthers, whose exit was revealed on insurancetimes.co.uk this morning. Carruthers is the first member of the Towergate top team to leave the organisation since January’s Advent deal.

Carruthers, who has been Towergate’s COO since 2005, was a member of the company’s executive management board and a former chairman of the company’s broker software house Open GI. And while less high profile than some of his fellow execs, Carruthers was a safe pair of hands who was wheeled in to oversee PowerPlace following Matthew Reed’s exit to join Amanda Blanc at AXA.

Gallagher gallops on

Meanwhile, the onward march of Arthur J Gallagher continues. The US giant’s recently rebranded UK retail broking arm has hired a four-strong team - understood to have joined from Willis - to augment its Midlands operation. The departure will be a blow for Willis, which flew in president Joe Plumeri to launch its new office in Birmingham’s Jewellery Quarter last year.

The announcement is also notable for including a statement by Patrick Gallagher, who is not only worldwide property and casualty managing director, but the son and namesake of company chairman J Patrick Gallagher.

He is understood to be overseeing the company’s push into the UK retail market, exploiting the expertise honed in Gallagher’s US homeland, where the broker is primarily a retail operation.