The introduction of new data protection rules could have a knock-on effect on advisers seeking professional indemnity insurance, it has been claimed.
The concerns stems from the General Data Protection Regulation, a European law which comes into effect in May 2018.
It sets out a number of new powers and rights, including the right to be erased, which means an individual can request the deletion of personal data relating to them held by a company.
Last week Financial Adviser revealed there were widespread concerns about how advisers would be able to defend themselves against Financial Ombudsman Service complaints if they were forced to delete their records.
But now it appears this rule could also affect professional indemnity insurance premiums as well.
One insider at a network, who wished to remain anonymous, said: “A key concern here is that maintaining good records is a key component of securing professional indemnity insurance cover.
“Put simply, you’re more insurable if you can demonstrate good record keeping.
“Were a firm forced to delete records there is a risk this may void their professional indemnity cover and/or make it more difficult to obtain cover.”
Meanwhile a broker dealing with IFAs, who also wished to remain anonymous, said he is currently starting the process of discussing the issue with insurers but agreed this could be a problem.
He said: “We are a bit in the dark at the moment.
“The last thing we would want is some sort of exclusion, such as if there was no documentation then there is no coverage – that would be the worst case scenario.”
Financial Adviser contacted several PI insurers and brokers, including Collegiate, Howden and Brunel to ask about the impact on premiums, but none of them responded.
Martin Greenwood, chief executive of Tenet, said: “Good record keeping has always been a priority from both a Treating Customers Fairly and professional indemnity insurance perspective and so long as firms have a lawful ground to retain the information, such as to demonstrate the suitability of the advice given, then they should not have any issues with General Data Protection Regulation.
“It remains to be seen how the Financial Ombudsman Service would treat such cases however, especially where a customer has requested their information be destroyed.”
The Financial Conduct Authority, which is currently reviewing the professional indemnity insurance market as part of its review into the Financial Services Compensation Scheme levy, did not comment on this issue specifically.
But the regulator has said it is currently reviewing the General Data Protection Regulation requirements and working with the Information Commissioners Office ahead of the regime’s introduction.