Advisers working in the health and protection insurance markets will see their Financial Conduct Authority (FCA) fee rate dip slightly for the 2025-26 financial year.
It means they will be paying around £1.72 per thousand pounds of annual income this year compared to £1.73 in 2024-25, according to the regulator’s proposals.
This is despite intermediaries in the A.19 general insurance intermediation fee block, which includes those writing protection and health insurance business, paying an additional £800,000 towards the FCA’s operating costs for the year.
Data from the regulator showed general insurance intermediaries will pay £38.8m in fees in 2025-26, up 2.2% from £38m last year.
However, the FCA is expecting revenues within the sector to grow by 3.3% to £23bn from £22.3bn, resulting in the reduction in fee rate.
This is in spite of the FCA expecting the number of firms operating in the fee block to drop by 2.8% to 11,373 from 11,701.
As part of its consultation the FCA noted that around £4.1m in retained penalties will be applied to reduce fees for those in A.19 fee block – an estimated 11% rebate.
Also contained in its consultation, the FCA confirmed that minimum fees for firms will increase to £2,000 from £1,750 – this is expected to raise an additional £3.4m, a 12% increase to £32m for the year.
FCA funding budget up
Overall, the FCA set its annual funding requirement (AFR) for 2025/26 at £783.5m which is a 2.5% increase from 2024-25, but below the 6.15% increase of the previous year.
One of the new costs for the regulator is overseeing ESG ratings providers which government legislation is currently being developed for.
It noted the cost of developing the regulatory regime for ESG ratings providers is £3m and the proposals for the future regulatory regime will be consulted on this year, once the legislation is finalised.
The FCA also added that it is creating a new fee block to handle any potential compensation or recovery costs as a result of motor finance discretionary commission arrangement (DCA) complaints.
“We believe a more targeted approach is the fairest way to recover these costs,” the regulator said.
“To implement this, we propose placing the variable fee-paying lenders that sold a DCA agreement between 2007 and 2021 into a new fee-block (CC4).”
Based on the information currently available, the draft fee-rate for these firms in 2025/26 is £0.767 per £1,000 of annual income above £250,000.
The final rates will be published in July alongside the FCA’s response to stakeholder feedback.
The court action covering motor finance DCAs continued with a Supreme Court hearing on 1-3 April.
There are fears any compensation bill could near or even outstrip that of the payment protection insurance (PPI) scandal.
