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FCA must postpone FOS limit increase, says trade body

Adviser trade body Pimfa says insurance companies need more time to establish offer terms reflecting the new Financial Ombudsman Service compensation limit.

The new £350,000 ceiling on compensation claims comes into play in less than a week.

Pimfa says advice firms cannot be expected to have PI insurance confirmed and the FCA should postpone the implementation of the levy raise.

The body says: “The impact on the PII market was an area of key concern flagged by Pimfa; we are disappointed that in setting an implementation date of 1 April the FCA has failed to properly assess the impact on insurance companies and their ability to offer terms reflecting the changes in the compensation limit.”

Pimfa adds it has been assessing the impact of the new limit on its member firms which are currently looking to renew PI insurance.

It says: “The FCA must immediately postpone the implementation of the rules and revisit the impact of the increase in the compensation limit.”

Pimfa: Regulation changes bring chance for more diversity

Pimfa’s calls for the FCA to rethink its plans follow those of fellow adviser trade body, Libertatem.

The group put together a “steering committee” of industry professionals last week and has confirmed a meeting with the FOS.

It will also look to meet with the FCA and the Treasury to get a fuller picture of the affects of the £200,000 increase.



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

  1. FOS must, surely, have done a full impact assessment of the potential impact of the change, they can’t have been naïve enough to rely on their, largely irrelevant, 2,000 cases figure – can they? If a proper assessment has been carried out then let’s see it, if it hasn’t then one should be carried out immediately. Either way, these calls for delay must not be ignored.

  2. Our PI is due for renewal on 11th April. The premium rate we have been quoted has gone down (actual premium up simply due to incraese in turnoever).
    We don’t do DB tranfer advice or any high risk business so insurers all happy to offer us terms says our broker….. the sting in the tail is that they all appear to exclude payouts directed by FOS in excess of £150k (i.e. the current limit and not the new limit coming in on 1st April with a £350k FOS max payout). QED not only must our new policy be non compliant as of renewal date, but EVERY other small firms policy must be non compliant as of 1st April unless the firm is covering the incraesed capital adequacy this change would entail, i.e. an increase from a £20k requirement to a £220k requirement with under 3 weeks notice in our case! I contacted FCA firm contact centre within 1 hour of finding this out last week and their staff didn’t even know about the FOS increase. I am still waiting to hear back from them as to their solution for this problem for everyone as from 1st April….
    Prior preparation and planning prevents P*SS poor performance but despite the F-pack concluding what they wanted BEFORE consulting, they chose to ignore the feedback and now we have this debacle.
    What a bunch of…

    • Doesn’t the FCA always ignore feedback? Its ‘consultations’ are just hollow shams, merely going through the motions. Why bother to submit feedback? It makes not a scrap of difference to what’s already been decided.

  3. Total self interested rubbish. Ripped off clients should receive full 100% compensation for their losses. Time limits for making claims should also be removed. Common justice demands no less.

  4. John Donaldson 2nd April 2019 at 5:47 pm

    I have had this very helpful e-mail form our PI providers (collegiate) – setting ou t both the problem and their solution. How refreshing – full marks to Collegiate!


    With effect from April 1st the binding award limit for FOS claims will increase from £150,000 to;

    – £160,000 for complaints about acts or omissions prior to 1st April
    – £350,000 for complaints about acts or commissions after 1st April

    Concerns were raised in response to Consultation Paper 18/31 that the proposed increase in limits would lead to increases in premiums, restriction in cover and fewer insurers willing to insure Financial Advisers because;

    – The paper fails to address the right to compensation needs to be balanced against a firm’s right only to be held liable to pay such compensation after a fair hearing and due process

    – The paper fails to balance the competing objectives of consumer protection and access to a competitive financial services market

    – The aim of FOS is to provide a quick, informal and free (for complainants) dispute resolution service to the financial services industry and its powers and processes are specifically designed to meet this aim and it is not intended to provide a forum for all complaints regardless of value. That some complainants have potentially high value complaints does not of itself mean the award limit should be increased. Separate, objective consideration needs to be given to whether the FOS is a suitable forum for higher value claims

    – The FOS is not obliged to apply the law but can make decisions according to what an Ombudsman considers to be fair and reasonable, FOS final determinations are binding (if accepted by the complainant), enforceable in court and not subject to any form of appeal, and, perhaps most importantly never conducts hearings in person, has no power to require complainants to provide full disclosure and does not call upon or consider independent expert evidence on complex, technical issues. As such, the FOS process does not provide a rigorous analysis of evidence – certainly when compared to a court process

    – The above does mean that the FOS can provide the quick, informal dispute resolution service it was designed to provide. However, these same features are singularly unsuitable and inappropriate for dealing with higher value complaints, which are often also more complex. Fundamentally, it is not fair or reasonable for firms to be held liable for very large amounts of money without the protection of a fully rigorous examination of evidence

    On 8th March the FCA announced that the limit would be increased with effect from 1st April without responding to the concerns raised, resulting in firms with existing policies already in place potentially having cover that didn’t comply with the increased limits with effect from 1st April. This is clearly not an acceptable situation for Collegiate policyholders so we can confirm that with effect for 1st April all active policies will provide a full indemnity for any FOS awards up to the new limits specified in PS19/8, subject to policy terms and conditions.

    However, this will not be extended to complaints about Defined Benefit Pension Transfers arranged after 1st April 2019. If any current Collegiate policyholder wishes to continue arranging Defined Benefit Pension Transfers after 1st April then we can consider providing cover for the increased FOS limit subject to completion of the pension transfer questionnaire – please click the link below:


    Richard Turnbull

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