2003 was a year of good news and bad news.
Good news! The FSA is halving the number of consultation papers it publishes next year. Bad news! The Treasury select committee is holding an enquiry so we will not notice the difference.
Good news! IFAs still account for a tiny proportion of complaints, especially complaints about endowments. Bad news! No one wants to focus on that.
Good news! There are more PI providers in the market. Bad news! Have we noticed the difference yet?
PI has dominated the Aifa year. When I fail to mention it in one of my columns, I am always inundated by as many as two emails from IFAs concerned that Aifa is not giving the subject the attention it deserves. Let me get my defence in immediately. It is our top priority. It is not indifference, it is the sheer impossibility of finding anything constructive to say about this direst of dire situations that leads me to divert to sunnier subjects such as EU directives and depolarisation.
We have moved the issue forward over the last 12 months. The new flexibility from the FSA and its apparent patience toward those without cover are changes for the better. But they are at best temporary solutions. They provide a palliative, not an answer for the medium term, never mind the long term. We have two options. We can wait for the PI market to turn – and we may be waiting some time although turn it will because PI markets are not immune to market forces – or we have to think outside the box.
There are signs that this is starting to happen. We have heard recently of creative financing approaches being developed by various financial institutions which would make financing available in some form or another to help businesses meet the cost of claims for alleged negligence, other than the catastrophic – the latter would be priced and covered in the PI market, which has the experience to evaluate this sort of risk.
We have also heard of firms looking to take advantage of the collectivist provisions in CP193 which would enable firms to join together to secure cover on more competitive terms than would be available to them singly.
Innovation may cause a competitive reaction from the PI underwriters. It needs to be encouraged and developed. It would be indemnity insurance, Jim, but not as we know it.
One last observation on PI. We still hear stories of terms being presented to firms at the very last minute on a take-it-or-leave-it basis. The PI market needs to reread the OFT report on liability insurance which specifically criticises this practice. I hope the underwriters have not mislaid their copy. I have not mislaid mine.
“God bless us everyone,” as Tiny Tim said. Bet he did not have to pay the PI premium. Come to think of it, maybe that is the explanation for Scrooge.
May I finally revert to my old friend CP196 on the cistance marketing directive. Keen readers of this column (both of them) may recall that I was deeply troubled by the concept of a meaningful simultaneous physical presence test (as opposed to a literal simultaneous etc). I spoke to theologians and moral philosophers. At last, I found enlightenment. I was ill and watching daytime TV (yes, I was that ill). An old episode of Doctor Who convinced me that the distance marketing directive works fine with a Tardis and a breach in the space-time continuum. We get to beat the Daleks by episode four. FSA consultations – solved with the help of UK Gold.
Paul Smee is director-general of Aifa