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FSA must take a slice of the PI

Want to lose your audience entirely? On the basis of seven months

travelling around the country talking to IFAs on a weekly or twice-weekly

basis, I can reveal that there is one issue which gets the eyelids drooping


Just utter the magic word Serps and they&#39ve nodded off. Couple of

sentences later and I&#39ve joined them. You&#39ll remember the story of the

Government spokesman in the House of Lords who dreamed that he was giving a

speech to the Lords and woke up to find that he was.

There are many more subjects which get a roomful of IFAs reacting.

Professional indemnity insurance is almost at the top of the list.Stories

of claims refused, premiums jacked up and excesses sky-high are legion. The

message that something must be done came across loud and clear. And not

just from IFAs. PI underwriters and brokers alike seem uneasy with a market

which is not delivering the goods for anyone.

In these situations, there is a temptation to go for the quick-fix Big

Solution which tries to construct a new market without the deficiencies of

the existing one. History suggests that these attempts are usually doomed

to eventual failure and even higher costs.

So the trick is to deliver something which is perhaps less dramatic but

offers a better chance of long-term change. This is what the initiative led

by Aifa, Ilog and Pass is intended to achieve. The initial step of a

communications forum involving IFAs and all parts of the PI market plus,

crucially, the regulator may sound tentative.

But our contacts with PI insurers and brokers suggest that there is a

fundamental lack of understanding about IFAs and their business which makes

the pricing of risk difficult and leadsto the sort of premium fluctuation

and changing questions which cause so many concerns for IFAs at renewal


Most significant of all is the attitude of the regulator. When the FSA

speaks, the PI market listens but it does not always understand. It can see

risk where no risk exists. The involvement of the FSA in the forum is a

significant step forward. It may bridge a significant gap in communications

which has worked to the disadvantage of the IFA.

I believe the FSA has turned its back on the constant review of past

business which has proved so unsettling for PI underwriters. Let us try to

get that message across.

There are also some further steps in the pipeline. The development of core

standards for brokers will ensure IFAs can assess what service they are

receiving. We can also point up self-help measures for the market. If an

IFA understands and manages the risks in their business, they may convince

the PImarket that they represent a lower threat and can justifiably be

offered a lower premium. We will help identify those consultants who can

help IFAs put that message across.

This is not the easiest nut to crack. Let us hope we can at least start to

move perceptions in the market.


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