The banking industry's decision to abandon its appeal against the High Court's judgment on the mis-selling of payment protection insurance (PPI) could lead to a further flood of claims.
Steve White, head of compliance and training at the British Insurance Brokers' Association said that while the decision was good news for consumers there was a worry that the decision would impact credit brokers heavily.
Credit brokers are in the same Financial Services Compensation Scheme (FSCS) pool as general insurance brokers and any failures in the credit broker market, as a result of PPI claims, would directly affect the amount that brokers would have to pay into the FSCS scheme.
Many health insurance only brokers will be classed in the general insurance category as well.
"How many credit brokers will this push over the edge?" White asked.
"The regulator said that [the decision] would force some credit brokers into the scheme. We just hope that the regulator's numbers [of credit brokers who could fail] are right and not undercooked.
"Brace yourself. We've seen the impact that one failed credit broker (Picture Finance) can have and this decision could have serious ramifications. It highlights the need to sit down with the regulator and get on with consulting on a fairer compensation model for general insurance brokers."
This article is from COVER's sister title Insurance Age.
