A better way must be found to manage claims against IFAs on defined benefit transfers, as the current settlement process is untenable, experts say.
In the latest edition of Money Marketing’s series of live debates, MM Wired, Delta Financial Management director Jarrod Ellis, O3 Insurance Solutions managing director Jamie Newell and Libertatem director general Garry Heath discussed how advisers can secure the best deals on their professional indemnity insurance.
The panel agreed the current situation where advisers face mounting premiums and are worried about claims against them, while insurers might drop out of the market, is not sustainable.
Heath said: “We are in a situation where the Financial Ombudsman Service does not have the confidence of anybody. It does not have the expertise to deal with large cases or specialist areas like pensions.
“I had a meeting with FCA last week and it said FOS will have a greater injection of expertise. Advisers can follow the FCA rules but claims just arrive at FOS and it just tears up the rules.
“You can have a compliant file and still have a FOS claim. The FCA can put you out of business, but FOS can take your house away.”
Newell pointed out DB transfer claims are the latest issue advisers, regulators and insurers have to deal with, and have much in common with other areas of business that caused issues in the past.
He said: “There has always been a product that is the focus of everything we are talking about. It used to be structured products and then payment protection insurance. But the way DB transfers are different is the complexity of the claim. PPI claims were simple compared to them.
“Currently the PI insurers are policing the market better than the FCA but firms need to start saying no and turn away clients from DB transfers. The pensions review from the 1990s cost the industry £14bn but it would cost much more in today’s money. We need to get ahead of this now.”
Ellis added: “Financial planning is an art and not a science. We need to make sure there are more structures around some of the procedures. A DB transfer is like heart surgery. It might not be good for you, but go to a licensed surgeon.
“FOS is there to protect consumers but we need a better system and well-rounded insurance market. We all need to be working together to drive through better results.”
Heath said that there should be “a two-tier system to deal with small claims and a different one that has the expertise to deal with complex cases”.
He added: “A better way needs to be found otherwise no one will be able to get advice.”