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FCA gives advisers five days to report non-compliant PI cover

Firms have five days to report any professional indemnity insurance polices that are not compliant with the new Financial Ombudsman Service award limit.

Last week Money Marketing reported the FCA will consider the individual circumstances for advice firms who cannot get their professional indemnity insurance re-confirmed before the 1 April.

The limit increased from £150,000 to £350,000 today but there has been a backlash from advisers who say they cannot renegotiate their insurance contracts in such a short time.

At the end of last week the watchdog wrote to firms explaining how they should check their insurance cover in light of the change.

The letter says it is required that personal investment firms take out and maintain professional indemnity insurance that is at least equal to the requirements in the FCA’s handbook (IPRU-INV chapter 13).

This suggests an adviser needs cover to the tune of €1.25m (£1.1m) for a single claim and €1.8m in aggregate to be on the right side of the rules.

The letter goes onto say firms should check if their insurance policy provides cover for the new FOS award limits and speak to their insurer or broker if they are not sure.

It also says firms should complete an online survey within five working days to notify the FCA if their policy does not provide compliant cover or contact it directly.

The letter adds: “We will review your plan alongside other information we hold on you and contact you if we have any concerns or further questions.

“In the meantime, you should urgently progress your plans to obtain compliant cover and let us know when you have done this via your dedicated supervisor. If you do not have a dedicated supervisor, you should let the FCA firm contact centre know.

“We recognise that some firms may be in a position where they need to obtain different professional indemnity insurance following the increase. We may be prepared to allow firms who follow the steps set out above time to make these arrangements. We would expect insurers to deal fairly with firms in this position.”

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. Unaccountable, Unreasonable, Non Logical.
    FCA are frankly ridiculous in forcing through this requirement relying on the goodwill of PI Underwriters.

    The FCA knows full well that the PI Market is in retreat and to force firms to get cover in 2 weeks is incompetent bully boy regulation.

    Its bad enough the limit has been increased to 350k but not use a transitional period is stupid and causes unnecessary problems for IFA’S and PI Insurers alike.

    By the way FCA thanks for the EMAIL and 5 day deadline sent on Friday at 8 oclock pm.
    Useless!!
    Are you accountable yo anybody!!

  2. Barbaric use of power !
    Open rebellion is the only way …

    We are a country divided already, civil war is but a flip of a coin away

    And in a country where the people’s rights are sacrosanct, democracy the shining light ….

    Yet people, good honest working people, people who have done nothing wrong will be fed to the wolf’s on a pewter platter

    I am a proud honest man, I work hard for my clients, but this morning I cried, 27 years all but washed away with 5 days to decide, throw a load more cash in the pot, yield to corrupt regulations or walk away ?

    BTW in those 27 years, not one complaint ..not one ! Yet collectively punished for the ones who have had them in the hundreds and for the ones who will continue to scam ….

    And the to top it all ……hundreds of CMC,s are applying for FCA authority …..

    I fear my mind has been made up for me !

  3. Julian Stevens 1st April 2019 at 2:24 pm

    When asked about why the FCA had failed to tackle the issue of most firms engaged in selling UCIS and other non-mainstream investments having no relevant PII cover AT ALL in relation to such activities, Andrew Bailey’s response was that it wasn’t a matter of particular concern to the FCA.

    Has this changed?

  4. Can anyone actually get through to a PI Insurer today?

    I think an amnesty is called for. Things are descending into farce.

    • That’s why increasing numbers of advisers are referring to them as the Financial Catastrophy Authority.
      I pointed this problem out to them over a week ago and said that the £150k cap was a standard term in at least one main PI brokers policies and that would mean non compliance was automatic for many firms as from 1st April. The firm contact centre staff I spoke to didn’t even know about the FOS increase from £150 to £350 and I asked to talk to an organ grinder and not a monkey which took until Friday lunch time and at just before 5pm they told me they’d email all advisers, I assumed with a solution or a delay to the increase, but NO just telling you all to crash the PI broker’s phone lines by trying to get cover made compliant with the new rules.
      This is not proportionate regulation. does not maintain confidence in the system and frankly, were they not a Monopoly I suspect we’d all go and find another regulator.
      MUPPETS

  5. Julian Stevens 1st April 2019 at 8:02 pm

    What does the FCA plan to do if two thirds or more of the entire adviser community, including networks, simply cannot obtain this additional cover? Insurers may well simply say No, which will create a constitutional crisis. For the FCA to remove the permissions of that many firms would effectively cripple the industry overnight. Madness.

  6. disgusting

  7. Apart from anything else, we still have no idea what responses were submitted to the FCA’s “consultation” on raising the limit. Its steadfast refusal (as usual) to publish them for all to see and to debate in open forum (as should be the case) strongly suggests that the overwhelming majority will have been against the idea.

    Given this scenario, how can the industry possibly have any trust, faith, confidence in or respect for the integrity of the FCA? The question is, of course, rhetorical.

  8. Julian Stevens 8th April 2019 at 9:59 am

    So here we are more than five days on. How many firms have had to report not having been able to secure the additional cover and what action does the FCA propose taking against them?

    From what I’ve read, a number of insurers who’ve granted it in respect of most areas of business are holding back from doing so for DB transfers pending clarification on a number of issues from the FCA. Given that DB transfers seem to be the current PII hot potato, this doesn’t seem to constitute very satisfactory progress. And you can bet your boots they won’t grant cover in respect of most, if any, non-mainstream investments.

  9. John Donaldson 8th April 2019 at 5:04 pm

    So…just had my PI renewal quote, with 10 days to accept it or find alternative cover. As a firm we carried out 14 DB transfers since 4/2015 (16 in total since 2010), but seeing what was happening, we have decided not to offer this service any more. The excess on the cases we have alreay done, is now increased to £25,000 from £5,000 – and the annual premium has doubled. Around 3% of our annual income will now need to be allocated for PI costs. I would be interested to hear how other firms are dealing with this situation. We are profitable and can pay the premium for now, but where do people suggest I recoup this extra cost from?

  10. Our insurers will not cover DB transfers above the old FOS limit, and if this is consistent across the industry then no firm will meet the Gold Standard being proposed by the PFS for DB transfer advice, unless they are self insured, and you can see where that is going in terms of consumer choice.

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