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Endowment review quadruples PI rates

Professional indemnity insurance premiums for the coming year are set to quadruple, largely due to endowment mortgages, according to leading PI broker PYV.

The warning comes as some IFAs are calling on life offices to provide guarantees to endowment policyholders that their mortgages will be paid off at maturity.

Advisers argue an industrywide initiative would calm public fears and help resolve the PI issue.

PYV managing director Ian Boscoe is warning IFAs that typical premiums will soar by between three and four times present levels due to underwriters&#39 concerns about endowments.

Boscoe predicts policy excesses for the next year will be equivalent to 3 per cent of turnover for pension and FSAVC claims and 1 per cent for endowments. This will mean excesses of £3,000 for IFAs with turnovers of £100,000.

He says that underwriters are worried about endowments because they do notyet know how many claims there will be.

Boscoe says: “Underwriters are more skittish about endowments than they are about FSAVCs because it is not clear how many cases there willbe and no one is sure whatis going on. Brokers like uscan get the premiums andexcesses down.”

IFAs say a solution could be found to end the current fears over endowment shortfalls if life offices wrote topolicyholders offering them the chance to end the riskof shortfalls.

To do this, policyholders would have to sign away any surplus cash the policy may bring. This could suit many policyholders who are desperate for a guarantee that they will be able to pay off their mortgages, say IFAs.

IFA Byrne Williams managing director Tony Byrne says: “It is a good idea for life offices to give policyholders the chance to remove the risk of not making their targets.”

l Lloyd&#39s broker Holman Insurance Brokers is re-entering the PI market with a new division called Holman Professional Indemnity.

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