Plea for small insurance brokers

The British Insurance Brokers' Association (BIBA) and the Federation of Small Businesses (FSB) have jointly warned the Government that they must do more to combat the disproportionate impact of regulation on small insurance brokers.

On the first day of their annual conference in Brighton, BIBA released new research showing that the smaller the company the greater the proportion of their annual income is spent on meeting the demands of regulation.

Disproportionate

Representing over 50,000 individual brokers, Eric Galbraith, Chief Executive of BIBA, has written to the Prime Minister, urging him to urgently review the disproportionate cost of regulation on small businesses.

The new research shows that an average of 3.7 per cent of a company's annual income is spent on meeting regulation. However, for companies with less than £100,000 in income that figure rises to 5.20 per cent, compared with 1.13 per cent for companies with an annual income of more than £100,000,000.

Eric Galbraith, Chief Executive of BIBA, said: "This new research makes it clear that the Government needs to do more to ensure that regulation is proportionate. Excessive regulation can be damaging for all businesses, but it is not good enough that the smallest companies are having to spend five times more than the largest simply to keep up with regulatory demands. Everyone knows that regulation is required, but it should be proportionate and not penalise the smallest businesses."

Stephen Alambritis, Head of Parliamentary Affairs for the Federation of Small Businesses, added: "It is clear that the disproportionate cost of regulation, outlined in this research, needs to be addressed by the Government. Our country's economic health depends on the success of small businesses. Regulation, both its volume and complexity, is a major issue for all small businesses. I urge the Government to review the cost of regulation on insurance brokers as a matter of urgency."

Letter to Prime Minister

Mr Galbraith's letter to the Prime Minister is transcribed below:

Dear Prime Minister,

As the Chief Executive of the British Insurance Brokers' Association (BIBA), the UK's leading general insurance organisation, it is with regret that I must inform you of the disappointing results of new research into the cost of regulation for our members.

The chart below indicates the proportion which firms spend each year on regulation. As you will see, the smaller the company the greater the proportion of their annual income is spent on regulation.

Annual Income (Percentage spend on regulation)

Up to £100,000 (5.20 per cent)

£100,000 - £1,000,000 (4.02 per cent)

£1,000,000 - £5,000,000 (3.17 per cent)

£5,000,000 - £15,000,000 (2.12 per cent)

£15,000,000 - £100,000,000 (3.5 per cent)

£100,000,000 + (1.13 per cent)

Base: All (430)

I am sure that when you said that you would 'not let business be bogged down in bogus bureaucracy' in 1998, this was not what you would have envisaged happening eight years on.

As a result, I would urge you to urgently review the impact of regulation on small insurance brokers.

Brokers play an important part in protecting and developing our economy, especially in the regions. It is simply wrong that they should be so disproportionately and detrimentally hit by regulation.

BIBA would welcome the opportunity to play a role in any review of the cost of regulation. If you feel that BIBA can assist you, or you or your staff would like to meet to discuss this research, please do not hesitate to contact my office.

Yours sincerely,

Eric Galbraith

Chief Executive

British Insurance Brokers' Association