Professional indemnity insurance premiums are near their peak and could start falling soon, according to an executive director at Howden Brokers attempting to help resolve the issue.
Chris Davies, who joined Howden earlier this year following years in the financial advice industry, said he was keen to work with PI insurers to encourage them back into the advice market.
He estimated the number of insurers currently offering cover to financial advisers was in the low double figures, and said it would be better if this number was in the "high teens".
Davies said: "The difficulty is that if we look at it in a pure economic sense, as the market hardens, premiums go up. Financial advisers are bearing the brunt of that.
At some stage, and we are close to that now, premiums start to peak and the level of premium is sufficient to encourage new insurers in. We are starting to see that now. There is interest in the sector.
"Speaking to my colleagues we feel we are towards the top of that premium peak now and that will help soften premiums."
Until 2018 Davies was managing director at 2Plan Wealth Management and before that he was executive director at Positive Solutions. Before this he worked at Tenet.
Davies said that his attempts to shine a more positive light on the financial advice profession would help encourage more insurers to cover financial advisers.
He said: "What I’ve been drafted in to do is to work with the PI team that works with financial advisers and brokers. To be something of a conduit between the technical PI team and the people in the industry.
"I can speak with some confidence about the changes that have taken place since the Retail Distribution Review.
"PI insurers often see the worst, they never see the best. Understandably they see things when things go wrong."
For many firms PI premiums have been increasing both in absolute terms and as a percentage of advice firms' revenues.
Certain advice businesses have seen premiums increase as much as 900 per cent, as the effects of the Covid-19 pandemic combined with the ongoing fallout of defined benefit transfer scandals.
Davies said one of the most common reasons advisers struggle to find PI insurance is because they do not give enough time to the process - and often fail to build a long-term relationship with their insurer.
He said: "We have seen it where certain firms have shopped around and if their current insurer doesn’t have a commitment to longevity they can pull out at short notice. There are consequences to moving around too often.
"The real key we find is time. The longer we as brokers can have with an application and get to know a firm, the better. There is a three-month window before renewal to get to know their business and understand the risks within it.