Insurers warned of a fresh hike in premiums for millions of customers yesterday as the City's watchdog hit the financial services industry with an inflation-busting 15.6 per cent rise in annual fees.
The Financial Services Authority's latest annual funding requirement has jumped by nearly £78m to £578.4m as the regulator faces the added costs of splitting itself up into two bodies from 2013 and overhauling its IT software.
Including the costs of the Financial Services Compensation Scheme, the total bill for financial services firms will top £1.2bn. The extra cash demanded by the FSA also includes a £10.3mpot to give the regulator's leading staff pay rises after a two-year salary freeze.
Otto Thoresen, director-general of the Association of British Insurers, lashed out at the FSA's demands for a "massive increase" when the industry faces increased costs. General insurers' contributions will jump 36.7 per cent to £40.1m while life insurers must pay £61.1m, up 37.3 per cent. Meanwhile consumers are already nursing a 12 per cent rise in insurance costs during the past year, with car insurance premiums up 21 per cent on average in the last year, according to official figures.
Mr Thoresen said: "In this difficult financial environment, all organisations need to be focused on controlling their costs. While insurers will do their best to absorb these costs, some will inevitably be passed on to the customers."