Providers of PII are making restrictions tighter, which could eventually force advisers out of the market, according to a new survey. The research also highlights the importance of a long-stop.
The survey, published by the Association of Professional Financial Advisers (Apfa) and carried out by NMG Consulting, showed that of a sample of 271 advisers, 31 per cent said their premiums have risen since last year. The average premium increase was 14 per cent.
Advisers are finding that the burden of PII is becoming increasingly heavy, and more areas of advice are being seen as ‘red flags’ to insurance firms. These include VCTs, EIS, and pension transfers. PII providers are increasingly looking at drawdown.
This could have the effect of either forcing advisers out of the market, or making them decide to go restricted so that they do not have to meet some of the more onerous requirements such as holding extra capital.
Chris Hannant, director general of Apfa said that the findings of the survey showed “evidence of a hardening insurance market for advisers,” triggered by compensation culture and cases such as Arch cru, Keydata and Catalyst.
In addition, he highlighted the need for a long-stop, since otherwise, when insurers are calculating premiums, the company’s risk is permanent and ongoing.
Frank Cochran, managing director of FSC Investment Services in Wolverhampton has found his firm’s experiences to be consistent with the Apfa research. “[PII costs] have gone up dramatically, and we’ve seen it double in the past couple of years. It’s getting very expensive. The way prices are increasing is ridiculous.
“Banks have walked away and washed their hands of the problems. It’s not fair on anyone,” he said. This does not appear to be related to any particular areas of advice, and they “seem to be hitting everybody for everything.”
“Insurers say ‘this is the price, take it or leave it’. You can’t trade without it, and it’s getting to the point where they will absolutely be pricing IFAs out of the market.”