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Standard PI contract ‘would protect consumers’: Caunt

Standard PI contract ‘would protect consumers’: Caunt

The FCA should do more to help advisers who are struggling to get professional indemnity cover, a financial adviser has said.

Sam Caunt, of Northamptonshire-based Moerae Life Financial Planning, said more guidance from the regulator would prevent advisers from getting the wrong type of cover.

He said: “I would much rather see a level playing field with everybody concerned being much clearer about what they are getting.

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“We need to protect the consumer and we need to make sure firms have got the right policy and it would help them get the right policy if there were simple guidance from the FCA.

“I would be concerned about people who are struggling to get PI insurance and getting it cheap, which represents a risk to their clients but also to other firms.”

Jamie Newell, managing director of PI underwriting agency O3 Insurance Solutions, said advisers have difficulty when it comes to understanding the exact wording of professional indemnity policies, including the difference between civil liability and negligence.

He said: “Having one standard wording policy, which all the insurers subscribe to, makes life far simpler.

“It is a detriment to the adviser because if it is mandated it would get rid of the bad firms because they would be uninsurable, and then the levies will not go up because we got rid of the bad firms. Why they do it I do not know.”

The FCA’s minimum requirements for PI cover are that a firm has continuous cover from the start of its authorisation, that it covers Fos awards made against the firm and that the firm has a policy excess no lower than EUR1.12m (£819,000) for a single claim.

Right to reply

Earlier this month Rory Percival, technical specialist at the FCA, told the IFP’s conference the City watchdog would not address the concern.

In response to a question posed by Jamie Newell, managing director of PI underwriting agency O3 Insurance Solutions, Mr Percival said: “[We are] not a heavily prescriptive regulator, [we are] a more principles-based and outcome focused.

“We do not have prescribed wordings for life insurance contracts, for investment funds, for advisers charging disclosure, for suitability reports – we do not have a prescribed wording for all of these different legislative and regulatory aspects. That is not what we do.”

Note: The paragraph regarding the FCA’s minimum requirements has been updated to reflect the actual policy excess.