Professional indemnity insurance for IFAs could be hit by new mortgage endowment time barring rules, says Aifa.
The FSA and ABI toughened up on endowments in May, with the regulator forcing firms imposing time limits on endowment complaints to make clear to policyholders that they have three years from their first red letter to complain. The ABI requires standard reprojection letters to draw attention more clearly to the need to act to deal with any shortfall.
Aifa is concerned that some providers may only contact those clients they sold directly to, leaving IFAs to pursue those who bought a product through them. If IFAs contact clients warning them about endowment shortfalls, PI providers could see this as inviting a claim.
PI insurer Collegiate is looking into the issue and has concerns about the problems if individual IFAs have to establish when and who needs to be contacted. It says it is keen to work with IFAs and Aifa to find a solution.
Aifa director of policy Fay Goddard says: “If IFAs were to send out time-bar letters it could cause problems for them with PI insurance as they would be inviting claims.”
Collegiate head of claims Martin Archer says: “It is irritating that the ABI and FSA have introduced these rule changes without any proper consultation to see how they would affect IFAs and insurers.”