Professional indemnity market update for IFAs
The professional indemnity insurance market for most of the 5,400 directly authorised IFA firms has been turbulent in recent years. Most saw a significant increase in their premiums and some harsh exclusions added to their policies.
The reasons for this turbulence have been well reported, but included claims triggered by the negative impact of poor investment returns, failure of funds, misselling issues and then the backlash of tax avoidance.
PI insurers controversially avoided many claims from these areas by excluding them from their policies through the exclusion of insolvency and other risks.
But the good news is most of these legacy issues have now run their course and are less of a problem. As a result, the PI market for IFAs is now a calmer one.
Plain sailing ahead...?
Because of the unpredictable nature of financial markets and the ‘with hindsight’ compensation culture of UK regulation, there will always be certain unforeseen risks around the corner for the financial advice sector. Add to this mix that IFAs have become easy targets for disgruntled clients and this makes the industry more difficult to insure than other professions.
At the moment, new professional indemnity claims against IFAs tend to be as a result of the usual negligence issues which all professions face day to day. These are the risks that PI insurers can predict and underwrite correctly.
There has been some concern recently and some scare mongering about a possible rise in claims from pension transfers, but the reality is that any claims from these will most likely be sporadic rather than endemic.
Will premiums come down?
The market is now much calmer than it has been for some years. In general, we are seeing premiums coming down especially for younger firms without legacy and those longer established firms who can demonstrate good risk management. These are the types of firm on most insurers appetite list and where competition between them is most active.
For a sensible conversation with a PI expert, please call us on 09134 710144 or email info@professionalindemnity.co.uk