Financial Services Compensation Scheme chief executive Mark Neale has welcomed the “serious questions” being asked about the professional indemnity insurance market in a recent FCA consultation.
The regulator published its consultation on the FSCS funding model last week.
The consultation says the regulator is considering introducing mandatory wording on professional indemnity insurance policies as well as ensuring policies provide cover for any FSCS claims, introducing restrictions on policy excess levels and restricted use of exclusions for some products.
In a blog on the FSCS’ website, Neale says: “It’s been clear to FSCS for some time that these policies often afford firms little or no protection against claims and can exclude recovery action by FSCS after a failure has occurred. In other words, FSCS is promoted from last resort to first resort when something goes wrong.”
Neale also supports re-thinking compensation limits, for example, the FCA is also considering updating the limits on consumer coverage following the pension freedoms.
He says: “There is a close link between consumer confidence and consumer understanding. As things stand, the differing compensation limits for different products work against understanding.
“In the case of retirement savings, these differences are more salient than ever now that people have choice about how to invest to generate an income in retirement.”