In their response PIMFA again stated their concerns regarding the proposal and the severe potential impact on the Professional Indemnity Insurance (‘PII’) market and member firms. In particular, PIMFA highlighted their belief that FCA should have actively engaged with the insurance market to make their own assessment of the impact of the proposals in CP18/31 and published it as part of the consultation.
The widening of access to FOS for small and medium-sized enterprises and larger charities and trusts, coupled with the proposal to increase the FOS’s claim threshold from £150,000 to £350,000 (index linked), increases the risk for PII underwriters.
In addition, there is no recognition of the proposals now confirmed in Handbook Notice number 60 that states all PII policies “effected or renewed from 1 June 2019 by Personal Investment Firms must not have clauses that limit the cover which would otherwise be provided by the policy, where the policyholder or a third party is insolvent, or where a person other than the Personal Investment Firm (e.g. the FSCS) is entitled to make a claim on the policy. The Handbook Notice make reference to one insurer estimating an increase of premiums of 25%”.
Liz Field, PIMFA CEO said: “If firms face a significant increase in premiums and/or the level of excess in order to obtain PII, and/or underwriters change the risks they are willing and/or able to insure, then it could have a significant impact on competitiveness, including raising the barriers to entry for new firms and further widening the advice gap. It could also change firms’ service offerings, depending on their ability to obtain PII cover at an economic cost.
“Our profession has an essential role to play in helping to build a culture of savings and investments, and we are deeply concerned that this move could severely impact firm’s ability to be able to provide this vital service to clients”.
Read the full PIMFA consultation response here.
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