FCA looks at merging FSCS and PI bills


The FCA is discussing combining Financial Services Compensation Scheme protection with professional indemnity insurance as part of the FSCS funding review.

Personal Finance Society chief executive Keith Richards says one of the ideas being talked about is a potential centralised fund that advisers would pay in to instead of paying FSCS bills and PI insurance separately.

The centralised fund could address new exclusions and high excess charges, and would be large enough to cover all payments when firms are likely to go out of business.

Speaking to Money Marketing Richards says: “Combining both PI and FSCS protection under one combined centralised mechanism is one of the potential options that should be considered.

“From a PFS point of view we are not suggesting that one is better than another, but would expect a sensible review to a least consider them only to discount them if they are not appropriate.

“PI is like any insurance, you pay a premium to protect your clients and your business from a risk of failure…The difference with PI is policies are reviewed on an annual basis to see if they are over-exposed to certain markets.”

He says because PI cover is able to exclude certain risks or withdraw cover, that can expose an advice firm to failure should a complaint occur in a specific area.

Richards adds: “What the FSCS has realised with PI is it doesn’t work and could be exposing advice firms for future failure.

“One of the considerations about combining them into a centralised fund is that it builds up sufficient value to not only protect the advice firm but also the consumer…There would be no right of the central fund to review or change cover. It’s just a consideration of whether there are solutions that service the public interest and the advice sector’s.”