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FSA shifts risk from PI insurers to IFAs

The FSA is temporarily amending the PI regulations in a bid to entice underwriters back into the market as hundreds of IFAs face rocketing premiums or fail to get cover.

But the modifications will prove controversial as the changes shift risk from PI insurers on to IFAs. Brokers may face excess charges for each individual complaint rather than one excess charge per type of complaint, as before.

A new compliance clause means that firms must be compliant with the FSA rules at the time a PI policy is written, regardless of subsequent changes to FSA regulations during the lifetime of the policy.

The 15-day discovery period, which allowed IFAs to submit claims after their PI policy expired, has also been removed. The modifications come into force on November 1 and will be in place for nine months. The FSA will monitor the effects of the changes and consider making a formal rule change next year.

Dickson Manchester associate marketing director Andrew Macpherson says: “My initial reaction is that it is better than nothing. Part of the reason that there are problems in the market is that insurers can&#39t make money, the other is that FSA requirements put them off. Any watering down will help but I don&#39t think they have gone far enough to persuade people unsure about entering the market to come down off the fence.”

Aifa director of public affairs Tracey Mullins says: “On the whole, we welcome this and hope it will increase capacity. It is a step in the right direction.”

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