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Advisers hit by soaring costs as PI premiums hiked by 50%

Advisers are being hit by soaring professional indemnity insurance premiums and increasingly onerous data requests as the PI market hardens.

Advisers who have renewed their PI policy in recent weeks say prices have risen significantly and the process is becoming more “invasive” and time consuming.

One advice firm, who wants to remain anonymous, has seen its premium more than double, from £3,500 for a two-year policy at last renewal to £3,700 for a one-year policy.

PI broker IFA Solutions managing director Jamie Newell says premiums have increased by 40 to 50 per cent in the past year across the market as a whole, while the firm’s own rates have gone up by about 20 per cent.

He says: “A couple of insurers have pulled out of the adviser sector so it is becoming a supply and demand issue. Insurers are being really fussy about the risk profiles of businesses and smaller advice firms are becoming particularly hard to place.”

Yellowtail Financial Planning managing director Dennis Hall says: “The PI market has hardened up over the past 12 months, and insurers which were competitive a year or two ago have now significantly pushed up their rates.

“The questions asked by insurers have become increasingly invasive, requiring more in-depth data on past business and on business written longer ago. The renewal process now takes the best part of a day.”

Philip J Milton & Company managing director Philip Milton says his firm had to join support services firm Bankhall at a cost of several thousand pounds a year in order to access a competitive PI policy this year.

He says: “Our existing insurer wanted to ratchet up our premium significantly, so in the end we joined Bankhall as our insurance broker could offer a deal exclusively to Bankhall members.”

Investment Quorum chief executive Lee Robertson says his firm was also forced to switch provider when renewing last month as its existing provider had pulled out of the adviser market.

He says: “There are less insurers in the market which is pushing prices up.

“Insurers’ forms are much more detailed now. They are asking for business to be broken down by business category and case size, making the process much more time consuming.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. PI is a waste of money, half of it goes in commission anyway..

  2. 50% increase I WISH !!!

    More like 120% (for my firm anyway)

    We just have to suck it up and pay, bit like the FCA fees, MAS, FSCS and any levy they want to shove our way !!!

  3. Mine (via Simply Biz’s connection with Collegiate) were just above last year’s (very reasonable to be fair at around 1.5% of turnover/3% of new business income). Mind you, I don’t have involvement in the peripheral or specialist areas of advice that seem to be like a hot potato with PI insurers for whatever reason.

  4. This article might be a bit more useful if some reasons for these horrendous increases were given, though my guess would be that it’s a combination of the FCA’s continuing programme of hindsight reviews (despite Martin Wheatley having suggested last year that the FCA wouldn’t continue with them) and rapacious CMC’s inadequately regulated by the MoJ.

  5. Is not a case here for mis-selling of PI ? — This is an offer which the FSA/FCA did not allow us to refuse in order to be authorised — and yet premiums for small firms can mean it is not “affordable” or the normal affordability rules are ignored by the PI product providers ( a luxury that Advisers don’t have) and suspended by the Regulators. The sheer size of excesses per claim also mean that far from protecting consumers in the event of claim they are more likely to bankrupt the Adviser.

  6. I have to say that with FOS making up the rules as it goes along (I recently saw a case where it said a client with a ¬£80K direct shareholding had never made any risk based investments), and lability for ever, I certainly wouldn’t want to provide PI to advisers.

    The insurer has to make a profit – just like any other business. Neither FOS nor the FCA do, along with the FSCS, they can happily spend somebody else’s money – and there is nothing you, as that somebody else, can do about it.

    Any adviser who is not trading under limited liability or who has given a personal guarantee wants their head examined.

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