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IFAs could lose cover in PI scam

A growing number of IFAs are falling victim to the latest PI insurance scam to hit the market, warns PYV chief executive Neil Pointon.

Pointon says the practice of “desking” quotes, where a broker offers non-existent terms to an IFA without contacting an underwriter, violates the FSA’s Treating Customers Fairly principles but is becoming more common in today’s highly-competitive soft market.

These brokers often send an indication letter establishing premium terms but stating that the terms are “subject to full market support” at the end of the document. Once the client has taken the bait, the broker contacts the underwriter, which will often reject the terms. In many cases, this leaves the client, who may have already left his previous broker, uninsured.

Pointon says this practice is particularly dangerous near renewal dates as some underwriters refuse to write business with firms that have a gap in their cover. He says the term “subject to full market support” is misleading, as in 90 per cent of cases IFA business is written by a single underwriter rather than a group of underwriters.

Pointon says: “This is sharp practice and a clear violation of the FSA’s TCF principals. These indications are presented as real quotes when they are not.”

FSA spokesman Robin Gordon Walker says: “Principles that apply to firms include that they must treat their customers fairly and that client communications have to be clear, fair and not misleading.”

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