New research from an insurance industry body suggests that the mis-selling of insurance products by brokers should be regulated thoroughly, but the current cost of regulation are too high.
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Research from the British Insurance Brokers Association (Biba) claims that insurance brokers contribute as much as 1% to the overall UK economy and that the risk brokers actually pose is far less than the current cost of regulation shows.
Biba claim that there are only two significant risks of market failure that insurance brokers pose to the new regulator, the Financial Conduct Authority and are the potential for low quality advice resulting in the mis-selling of products, and the potential for loss of client money.
The research also uncovered the heavy burden of direct and indirect regulatory costs to general insurance brokers in the UK. These costs are three times the size of the second most expensive European State (Ireland).
BIBA believes that this should be the focus of new regulation and not the current overly costly and disproportionate system of regulation.
Payment Protection Insurance Regulation
But many consumers will argue that the cost of regulation needs to be high simply because of a history of broker mis-selling, particularly in the area of payment protection insurance – something that could affect as many as 20 million people.