FSCS plans levy hike after PPI claims soar

The FSCS has announced plans to raise its overall levy for April 2012/13 to £221m, up from £217m for the year before.

The insurance industry will pick up £120m of the proposed £221m, mainly due to an increase in payment protection insurance (PPI) claims.

The changes would raise the levy for the insurers, part of the general insurance provision class. This class would pay £63.5m for 2012/13 compared to £50.5m in 2011/2012.

However, insurance brokers would pay less than they did last year under the suggested levy changes. The levy for the general insurance mediation class would drop to £57m for 2012/13, compared to £69.5m the year before.

The body expects PPI claims to be the biggest growth area over 2012/13.

More than 75% of mis-sold PPI claims dealt with by the FSCS come from claims management companies.

The FSCS will announce its final levy for 2012/13 at the end of March.

FSCS chief executive Mark Neale said: “A major focus for us in the coming year will be to pursue recoveries from major failures in order to reduce the costs on the industry.

“The existence of FSCS and its ability to respond to unpredictable workloads contributes to financial stability. That is why it is important for FSCS to invest in order to enhance its capacity to deal with large or multiple failures.”