The Tenet Group  

FCA's stance on PI cover is wrong

FCA's stance on PI cover is wrong

Tenet has criticised the FCA's proposals to clean up the professional indemnity insurance market, claiming the FCA is "coming at it from the wrong angle".

Mike O'Brien, group regulatory director for the Tenet Group, warned against regulatory proposals to improve the professional indemnity insurance market by mandating what should be covered.

He said: "The FCA is coming at this from completely the wrong angle.

Article continues after advert

"The FCA is looking at the professional indemnity insurance market and stating there is a problem. But it is not the professional indemnity insurance market which is the problem; we believe it is regulatory uncertainty that is the problem.

"The professional indemnity insurance market is responding to that in the only way it can. It cannot price for uncertainty."

He also said: "Simply mandating terms is unlikely to be the answer, as it will either push premiums up or, as it is already a small market, other providers will pull out of the market. 

"So we think the FCA is coming at it from the wrong angle."

Instead, Mr O'Brien said the City watchdog should focus on other aspects which have created problems for the advisory industry.

He explained the FCA "should sort out what the Financial Services Compensation Scheme should cover, what the reasonable limits should be, the long-stop - I know this issue keeps coming up - all these things should solve the problem, rather than mandating professional indemnity insurance.

"Getting the FSCS levy down and professional indemnity insurance premiums up isn't gong to solve anything."

Mr O'Brien was making his comments in response to the regulator's review of the professional indemnity insurance market. 

Last year, the FCA announced in its review of general insurance that when it looked at professional indemnity insurance there were "a high level of inaccuracies in policies, especially around the scope of cover for Financial Ombudsman awards and for any appointed representative a firm might have".

The regulator also suggested that some firms' professional indemnity (PI) cover was not always appropriate or sufficient, and called on insurers and managing general agents that provide PI to "review their products in light of the findings to ensure they are consistent with the needs of those intermediaries to whom they are providing cover".

When asked about Tenet's claim it was coming at the professional indemnity insurance market "problem" from the wrong angle, a spokesman for the FCA said it could not comment as the consultation was still open.

The FCA consultation on this subject closes on 31 March.

Find out more

Watch Mr O'Brien's full interview with FTAdviser online