Advisers should check with their insurers to make sure that cover is provided and verify the level of excess, says Keith Richards, chief executive of the Personal Finance Society.
He says it is worth remembering that PI insurers reserve the right to withdraw cover for ‘insistent client’ at renewal.
Mr Richards says: “Advisers need to use the benefit of experience not to expose clients or their firms to unnecessary risk – after all, if they know that facilitation will lead to a sub-optimal outcome, I think that we can be pretty sure that it will.”
Linda Todd, head of operations at Bankhall, says she would always advise firms to check with their PI insurer on whether they are covered for this type of business.
Ms Todd says the insurers’ requirements on how they deal with such cases should be examined by advisers.
Even if an existing PI insurer will currently provide cover firms, Ms Todd says advisers should also consider potential future impacts – what if at renewal the insurer is no longer willing to provide cover for such business (perhaps due to volumes of cases)?
As seen previously with Ucis, Ms Todd says where insurers identify significant risks of providing cover for particular areas of business then they may apply exclusions at renewal and firms may not be able to obtain equivalent cover elsewhere.
Mike O’Brien, managing director of Tenet Connect and Tenet Select, says there have been suggestions in some quarters that PI insurers are not providing cover for insistent clients or are applying more restrictive terms.
But Mr O’Brien says he has not seen any evidence to support this, but the ongoing FCA review should determine if it is true or not.
Handled correctly, he says insistent clients do not represent an increased exposure to risk but ultimately it is the claims experience of the adviser which will determine the availability and cost of coverage.
Mr O’Brien says the fear is that Financial Ombudsman Service may influence this particular outcome.
But if a client refuses to accept good advice there is no PI claim because the advice wasn’t taken up, says Garry Heath, director general of Libertatem.org.uk.
But he says this doesn’t mean that attempts to claim might be not be instigated by ambulance chasers or the like that may imply because you are an adviser the client thought they were receiving advice.
Mr Heath says: “PI covers advice given and accepted. There is no cover for rejected advice.”
