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&#39Crisis is unparalleled,&#39 says Smee

The extent of the PI crisis gripping the IFA sector is unparalleled

since the beginning of regulation, says Aifa director general Paul


The FSA must be consistent in its approach and be willing to

communicate with PI brokers, Smee told an FSA-hos-ted workshop for

IFAs in London this week.

His views were supported by IFA delegates. In an electronic poll at

the end of the session, 82 per cent said the state of the market was

a systemic problem rather than being temporary or cyclical.

Sixty-seven per cent said the changes the FSA introduced in November

to encourage greater capacity had failed to make any difference.

Smee said there has been a breakdown in underwriting discipline, with

IFAs left wondering why they have been denied cover. Even where cover

is available, it is often equivalent to self-insurance due to high


The poll found that 48 per cent of the 50 or more IFAs at the

workshop said their PI premium had increased by more than 100 per

cent over the last three years and 32 per cent said that PI insurers&#39

confidence in IFAs is non-existent.

Smee said: “The degree to which there is a hard market is

unparalleled since the beginning of regulation in financial services.

This is the first time that market forces have coll-ided with a very

prescriptive regulatory environment. Basic underwriting disciplines

have broken down, there is not a consistent pattern to the way some

firms are accepted and others are rejected.”

This week sees the start of a new Compliance Clinic column to help

readers chart their way through regulation. Our compliance expert

Gary Barlow of Compliance Solutions answers IFAs&#39 queries


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The fifteen-year itch

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