The Financial Services Authority has published further proposals on its fees for mortgage firms and some general insurance intermediaries.
CP192 – Further Consultation on Fees for Mortgage Firms and Insurance Intermediaries extends the fee-raising framework set out in previous paper CP180 to cover firms that sell mortgages or general insurance products where the proposed income measure will not accurately capture the size of their business. In some cases this is because they do not earn commission for selling their own products.
Key proposals in CP192 include a method for calculating a notional income figure for business which does not generate commission in the normal way, and changes to the fee-block arrangement set out in CP180 for insurers carrying out intermediary activities.
Where a lender or insurer advises on or arranges their own products, the FSA is proposing to create a notional commission figure equivalent to the amount a pure intermediary would earn by conducting the same amount of business.
The FSA proposes that this will be achieved by multiplying the volume of lending/premiums by a factor. The proposed factor for mortgage lending is 0.5% and 10% for insurance.
This figure will be added to any normal commission earned by the firm.
Where a firm receives payments from lenders or insurers for its advising or arranging other than on a commission basis, the weighting factor is applied to the business generated as a result, again to get to a notional commission figure.
The FSA is proposing to use this volume of business measure as the basis for determining a firm's periodic fees, as well as for determining which application fee band they will fall into.
CP192 also states that insurers who carry out intermediary activities will be allocated to both A.3 and A.19 fee-blocks. This will ensure consistent treatment between insurers who sell their own products, and pure intermediaries who were the focus of the proposals in CP180.