There has been a marked trend towards professional indemnity (PI) insurers failing to renew cover for advisers they have previously insured, according to a new report.
The report, by specialist insurance broker Protean Risk, stated that over the past 12 months a growing number of advisers have been told their existing insurers are unable, or unwilling, to offer terms.
Protean Risk’s survey of underwriters from the 10 insurers that underwrite 90 per cent of IFA PI risk in the UK market, found each of these companies had not offered renewal terms to one or more of their IFA clients in the past year.
Julian Brincat, head of IFA practice at Protean Risk, said one of the main reasons for this was concerns about defined benefit (DB) transfers.
He added: “Underwriters are keeping a very close eye on DB transfers and how they are being conducted, and a lot of firms are not prepared enough to be able to provide the relevant information to underwriters.
“They need to reassure underwriters they have the proper structures in place such as peer-to-peer reviews.”
Mr Brincat said despite the fact the Financial Conduct Authority had issued guidance on how to deal with “insistent clients”, PI insurers were still concerned about firms willing to help such individuals.
He added that more reassurance on the approach the Financial Ombudsman Service would take when considering future complaints from insistent clients, would be helpful for advisers and PI underwriters.
According to Protean’s survey, DB transfers are one of the main concerns for underwriters, along with tax schemes.
The report said: “This survey asked firms to provide information on the number of requests for DB-to-defined-contribution pension transfers that they had received post-pension freedoms.
“This report shows that a large percentage of firms that had not previously conducted any DB transfers, were now involved in this activity.
“Insurers fear an increase in complaints stemming from this new rise in demand, along with the potential of claims management companies pursuing advisers.”
Adviser view
Richard Ross, director of Norwich-based adviser Chadwicks, said: “We have not had any problems renewing our PI cover. We renewed it for 18 months about four months ago.
“We are concerned about DB transfers, and the ability of the regulator to apply current rules to the future, so we will only give advice on this to existing clients.”
