ProtectionAug 28 2014

New PI entrant could relax direct-to-adviser restriction

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Hoyl Underwriting Management, a new entrant to the adviser professional indemnity insurance market, has told FTAdviser may consider relaxing its direct-to-adviser restriction and going through middle-men, but only on the condition of having direct access to the end IFA client.

Speaking to FTAdviser, the firm’s director Paul Barnes said that while its initial business model had been based on direct access to advisers to best understand their business and risk profile, as an ex-broker himself he has no problem working with them.

“I understand brokers wouldn’t like us having direct access to clients, as they would be in the position of having to charge the client a fee to manage and I don’t think they’re going to add much to our product.

“I’ve been a broker for many years myself, I understand their role and we’re not anti-broker, but we do need that relationship with the client to understand their business.”

The firm has been doing business for three weeks now, after setting up to tackle what its directors saw as increasing costs and decreasing levels of service in the PI insurance market for advisers.

The model is one of a continuous policy, monthly paid, with monthly reporting to keep track of an IFAs performance against initial expectations. The firm also says it bucks a recent trend in the market of underwriting based on product area, and instead focuses on advice processes.

“We’ll make suggestions along the way and if they take these on we may be able to offer slight discounts, improving the profile of the business and the risk,” added Mr Barnes.

“Insurers are absolutely aligned with that, but of course we’ve got to get the client to buy into the concept. We’ve been going for about three weeks, with no advertising, but we’ve had quite a good response, a couple of nice ones and also some real dogs.

“We’re not looking to rule the world, if we can pick up 15-20 per cent of the market that will be great, because we don’t think there’s that many good IFAs out there. We anticipate having a declination rate of around 70 per cent.”

Several PI brokers have raised concerns around the firm’s use of the Elite Insurance Company as underwriters, as it is not yet rated by a recognised ratings agency or directly regulated by the Financial Conduct Authority.

Jamie Newell, managing director at underwriting exchange IFA Solutions, said that while he welcomes competition in the market, if he was an IFA he would “steer well clear”.

“Our corporate governance means we can’t use un-rated insurers as they have not been independently assessed, we have a duty of care to clients as we’ll be in the firing line if something goes wrong.”

“Just look at the solicitor’s PI insurance market, several un-rated insurers have gone bust recently.”

Jason Smart, chief executive at Elite Insurance, told FTAdviser that as the firm has offices in the UK, it can write business on a Freedom of Services basis through the European Economic Area passporting rules.

Being domiciled in Gibraltar, Elite Insurance is regulated by the Financial Services Commissioner For Gibraltar, which Mr Smart says is even more intrusive than the FCA.

He added: “Ratings are completely academic, but the only reason we’re in the process of applying is that many brokers will look for ratings as part of their due diligence process.”

Mr Barnes stated that while Elite being un-rated was an issue at first, “once we started looking at it and we met the people they were very knowledgeable, their attitute to claims is excellent, and they’ve retained Brown Jacobsen, who are one of the leading IFA business City law firms.”