Financial planners should group together and lobby their MPs on professional indemnity cover to get the ball rolling towards real change, Clarke Willmott partner Philippa Hann has said.
At the Chartered Institute for Securities and Investment Financial Planning Conference last week (October 6), Hann, a solicitor who is known for her work with the British Steel workers, delved into the topic of PI and the biggest problems businesses are facing.
Financial planners told her premiums that don’t appear to be risk-based, changes and notification requirements, the Financial Services Compensation Scheme levy, and communication issues between planner and insurer were among the biggest problems around PI.
Hann agreed “PI for financial services is broken” and urged financial planners to take control of the situation.
She said: “I think there is work to do with or without the CISI around lobbying Treasury because that is the only way we're going to get to the FCA to change the minimum standard for PI insurance, and for me, we absolutely need to do that because if we don't do that, none of [these problems] are going to change.
“The FCA doesn't want to do it because they don’t think there is enough capacity in the market, maybe.”
Hann said client detriment was a real problem when it came to PI, which then had a knock on effect on the industry.
“The system itself can see client detriment because if someone hasn’t got insurance, they end up having to go to the FSCS and there is a cap. I’ve had clients lose over 2m pounds and get £85,000 because that is the cap which is horrendous.”
However she added: “But we’re not going to change the way claims are made, that is the way most PI policies are put together.
“[Instead], there are some avenues that we can go down. One is that we motivate, we galvanise our energies, and we write to our local MPs, we do some lobbying and we get people on board, get the CISI and CII and whoever we can talk to come on board.
“We need to focus on getting the minimum requirements for your insurance changed which is going to be painful in the short term, but in the long term it brings you alongside solicitors, it brings you alongside accountants and it offers you the same benefits.
“It's not fair that you're in a situation where you don't know whether the business you're writing this year is going to be covered by your insurer next year. As a business owner, that is unacceptable.
“The longer we don't make noise, the longer this is going to be happening. It's not going to be an easy thing to do. It's not going to happen quickly but it needs to be done.”
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