Compensation paid to customers of failed insurance distribution firms fell by around £1m last year while claims made against intermediary firms were slashed in half.
Data from the Financial Services Compensation Scheme (FSCS) for the 2023-24 financial year also showed there were no new firm failures among the general insurance distribution class, which includes advisers in the health and protection markets.
Total compensation costs paid as a result of claims against this sector were £600,000 throughout the year, down by £1m from 2022-23.
And new claims made also dropped sharply from 628 to 314 in 2023-24, with the number of decisions upheld down to 276 from 623.
The upheld rate was largely unchanged at 65% compared to 68% the previous years, however the average value of compensation paid fell 16% to £2,250 from £2,694.
“Compensation paid to customers during the year was for legacy failures,” the FSCS said.
“More than 50% of the compensation paid to customers was for Norton Insurance Services Ltd which was declared in default in 2012 and The Mortgage Matters Partnership which was declared in default in 2019.”
It added that in past years, many of the claims received were for payment protection insurance (PPI) policies but most of these types of claims have now been resolved.
“No levies were raised for the general insurance distribution class as surpluses, carried over from 2022/23, met the funding requirements for 2023/24,” the FSCS added.
Mortgage and investment advice
Other key advice sectors also saw the value of compensation paid out drop over the last financial year.
Mortgage broker compensation costs dropped by around £500,000 to £200,000 in 2023-24 as fresh claims were also cut in two, while average compensation value per claim fell from £24,000 in 2022-23 to £13,000 in 2023-24.
Compensation included £180,000 for claims against Principal Mortgage Services Ltd which was declared in default in 2011 and £20,000 for claims against Pave Financial Management Ltd which was declared in default in 2012.
Meanwhile, total compensation costs for the life distribution and investment intermediation class decreased from £203m in 2022-23 to £180m in 2023-24.
Compensation payments for pensions and self-invested personal pensions (SIPP) advice claims remained the largest cost for this class at £99m.
The reduction in compensation costs in comparison with 2022-23 included receiving approximately 34% fewer new claims; and upholding fewer claims, the FSCS said.
“The uphold rate decreased from 67% in 2022-23 to 60% in 2023-24,” it said.
“This was mainly due to a greater number of no loss outcomes, where it is determined that the customer did not lose money for pension claims.”