Hoyl backs FCA’s long ‘overdue’ PI sector review

Hoyl backs FCA’s long ‘overdue’ PI sector review

Regulatory probing of the professional indemnity (PI) insurance sector has been endorsed by one provider.

Most of the specialist insurers contacted by FTAdviser declined to comment on the regulator’s plans to examine the sector as part of its review into the Financial Services Compensation Scheme levy.

However, Paul Barnes, director of Hoyl Underwriting Management, said its review was overdue.

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“Many providers have pulled out because of losses, and those few who have remained have been responsible for rising excesses and, just as importantly, increasing the use of exceptions to keep premiums ‘acceptable’.

“Adviser firms are struggling more and more to find suitable cover at an affordable price,” Mr Barnes stated. “We welcome the FCA’s initiative to turn the spotlight on this fundamental, yet increasingly costly, service.”

Duncan Philpott, executive director of Willis Towers Watson, said the issue is caused by the increasing numbers of claims being made against IFAs.

Mr Philpott said: “This class has cost insurers a lot of money, which is why there is a limited number of insurers in the market. With supply and demand, if there is a limited number of insurers the price goes up.

“The number and level of ombudsman awards has been going up and, as a result, insurers are having to pay out more money.

“Insurers are nervous about potential future losses arising with the pension liberalisation, and they are trying to mitigage their potential losses early.”

He said that if the Financial Conduct Authority capped the level of excesses, it could be a “doomsday scenario” because insurers could leave the market.

Adviser view

Simon Torry, a chartered financial planner with Essex-based SRC Wealth Management, said: “We have not noticed any significant increase in our excesses, but our renewal comes up in July.

“The FCA is part of the problem with the increasing burden of regulation. It is no wonder that PI insurers are getting a bit nervous.”