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Insurers may choke on this PI

There is no better evidence for just how deep the PI crisis has become than when IFAs are warned not to get in touch with those most in need of their advice.

It has emerged that PI insurers are telling IFAs not to write to clients they fear face an endowment shortfall in case it leads to a claim, although they can advise those who get in touch with them.

There are echoes of the pension review but in many ways this is much worse because, under the pension review, doing nothing was an option until the review had wound its course.

If an endowment is going to leave a shortfall on a mortgage, doing nothing is not an option. In most cases, the adviser should step in.

IFAs argue that if someone is going to make a claim they will make a claim eventually whether they get a warning of a shortfall from their adviser or their provider or when they come to pay off the mortgage. The last case is surely the worst, so why put a ban on IFAs writing to their clients simply to postpone the complaint?

It is also likely that a timely intervention from the adviser will mean that the client is less likely to complain because the IFA has provided the benefits that going to an IFA should.

At the very least, it is much more likely to prevent vexatious claims.

In these cases, we must always emphasise that PI insurers have cause to be concerned, given the regulatory environment that IFAs are forced to operate in. But in this case, they may be increasing the risk of more claims whether valid or vexatious at the same time as undermining the whole reason for going to an IFA.

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