FOS fee rise will hit PI costs
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The FSA admits that its proposed increase to the Financial Ombudsman Service award limit from £100,000 to £150,000 may increase professional indemnity insurance costs for adviser firms.
The regulator’s proposal to increase the FOS award limit was published in a consultation paper on complaint handling last week.
In the paper, the FSA says: “We have had some indication from insurers that PII premiums may increase due to an increase to the ombudsman service award limit. We have not been able to quantify the size of any potential increase, and would welcome further evidence on this point.”
The regulator adds that the impact may be significant for small firms where the cost of PII makes up a high proportion of their total income.
Collegiate Management Services legal director Martin Archer says the proposed increase would mean bigger sums being awarded without the adviser being given the right to an oral hearing.
He says: “The FOS is trying to deliver cheap, quick justice and to do that it has to discard an awful lot of the safeguards that courts have to make sure that justice is served. The FOS has to make a lot of compromises, and it would be the first to accept that. But once you start talking about significant sums of money, then those compromises are a lot harder to justify and I do not think they can be justified at £150,000.”
PYV chief executive Neil Pointon says: “The FOS seems to be moving further away from dealing with high-volume, low-cost complaints, the very reason some in the industry think the ombudsman was set up in the first place.”
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Readers' comments (1)
Gillian Cardy | 7 Oct 2010 9:33 am
The argument in the past has been that the vast majority of cases are settled well below the £100k limit. Therefore to increase the limit to £150k would only affect the smallest number of cases.
Lawyers who help clients with cases through the court system precisely because a case claim would exceed £100k would now be able to take more cases to FOS - which moves the goalposts about what claims history looks like (while reducing the cost risk of taking a claim down the FOS route before taking it to court iif the FOS claim fails).
Either way, show me any insurer who increases their total insured liability without increasing their premium - surely it's rank naivety to have any doubt that PI premiums would increase as a result of this change??
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