The FSA admits that its proposed increase to the Financial Ombudsman Service award limit from £100,000 to £150,000 may increase professional indemnity insurance costs for adviser firms.
The regulator’s proposal to increase the FOS award limit was published in a consultation paper on complaint handling last week.
In the paper, the FSA says: “We have had some indication from insurers that PII premiums may increase due to an increase to the ombudsman service award limit. We have not been able to quantify the size of any potential increase, and would welcome further evidence on this point.”
The regulator adds that the impact may be significant for small firms where the cost of PII makes up a high proportion of their total income.
Collegiate Management Services legal director Martin Archer says the proposed increase would mean bigger sums being awarded without the adviser being given the right to an oral hearing.
He says: “The FOS is trying to deliver cheap, quick justice and to do that it has to discard an awful lot of the safeguards that courts have to make sure that justice is served. The FOS has to make a lot of compromises, and it would be the first to accept that. But once you start talking about significant sums of money, then those compromises are a lot harder to justify and I do not think they can be justified at £150,000.”
PYV chief executive Neil Pointon says: “The FOS seems to be moving further away from dealing with high-volume, low-cost complaints, the very reason some in the industry think the ombudsman was set up in the first place.”