Openwork PI premiums rocket 30% due to ‘frivolous’ claims
Firm says cost of PI cover will make networks more attractive as it is “prohibitive” for advisers to carry cost themselves.
Openwork’s professional indemnity insurance premiums have rocketed by 30 per cent in 2012 compared to last year, Philip Martin, proposition and marketing director for the firm, has told FTAdviser.
Mr Martin said that although there are less PI insurers in the market now, the rise in premiums is primarily driven by a rising number of “frivolous” claims coming from claims management companies.
He said: “When investors or consumers complain, there is no financial downfall for themselves whereas for us, we need to investigate every complaint and this is a costly exercise.
“We have had all kinds of frivolous claims such as PI on a loan that we haven’t sold but of course it needs to be investigated. Although we have had more complaints than ever, the number of upheld complaints is lower than the industry average.”
According to complaints data published in September, Openwork was the subject of 100 complaints to the Financial Ombudsman Service during the first six months of 2012, 75 per cent higher than the comparable period in 2012.
This was, however, down by 16 from the 116 complaints witnessed in the latter half of last year. Openwork was the subject of 42 PPI complaints.
There has been increasing increasing consternation across the advisory sector at the rise in claims from CMCs in recent months.
Neil Liversidge, council member at the Association of IFAs and managing director of Castleford-based West Riding Personal Financial Solutions, recently wrote an open letter to prime minister David Cameron warning that a “free money” culture driven by ubiquitous CMC advertising is catalysing a trend of false claims against financial services firms.
Furthermore, Aifa has called for the incoming Financial Conduct Authority to regulate claims management companies in its response to the Ministry of Justice’s recent consultation paper. Aifa warned that the real problem with the claims management industry is not that the rules are wrong, but that there is a lack of enforcement.
In August, the MoJ’s Claims Management Regulator launched a consultation proposing tough new rules on claims management firms, including plans to end the practice of agreeing verbal contracts to submit complaints before fees are taken.