New research from the UK’s Institute of Insurance Brokers (IIB) shows brokers’ compensation scheme levies have increased by almost 1000% in the past two years.

The IIB figures, which were presented at the latest session of the UK’s All-Party Parliamentary Group on Insurance inquiry into the Financial Services Compensation Scheme (FSCS), shows that a broker with an annual income of £500,000 ($751,570) has seen its FSCS levy increase from £419 ($630) in 2009/10 to £4104 ($6170) in 2011/12.

IIB CEO Barbara Bradshaw says increases of a similar magnitude have been felt by brokers of all sizes over the same period.

UK brokers have faced a succession of increases in their levies payable to the scheme, due to rapidly increasing claims as a result of the mis-selling of payment protection insurance by credit brokers, who are in the same funding pool as general insurance brokers.

A previously announced review into the funding of the FSCS was deferred until a wider review of regulation by the UK Government is completed next year.

Ms Bradshaw says: “There is a case for an immediate and urgent review of the FSCS funding arrangements with a view to ring-fencing the liabilities of deposit-takers and, for the purpose of the compensation scheme levy, separating professional insurance brokers from opportunists selling insurance on the back of other products and services.”

The IIB’s figures also show a huge increase in the amounts brokers are being called on to pay in levies to the Financial Ombudsman Service, with an increase from £155 ($233) last year to £825 ($1240) this year for a firm with annual income of £500,000.

But brokers have benefitted from a cut in regulatory fees charged by the Financial Services Authority (FSA).

Ms Bradshaw says once the FSA fee cut has been taken into account, brokers are paying just over twice as much to regulators as they were in 2009/10.