Personal Finance Society chief executive Keith Richards has called on the FCA to be more proactive in its upcoming professional indemnity insurance data collection by approaching insurers directly.
The FCA outlined its plans to change the data it collects on intermediaries’ PI insurance cover in a consultation paper published earlier this week.
This will affect data collections on submissions due on or after 1 October 2020.
The watchdog says this will allow it “to have better data about the PI insurance cover of all firms that offer retail intermediation.”
Firms will have to confirm if they have no exclusions or limitations to their PI insurance cover and collect new data on whether exclusions apply to past or future business.
They will also have to collect new data on the nature of the exclusions applying to business lines.
Richards says that annual renewal of PI insurance could now be reconsidered.
He says: “The nature of PI insurance being annually renewable also needs to be considered as any claims trends could see cover have a big impact on the nature of the PI insurance cover availability, or may disguise pricing trends, if firms are purchasing less cover for the same price.
“It is essential that the FCA collects this data to inform their understanding of the true position regarding risk exposure and cost given the impact of pension freedoms and the recent doubling of Financial Ombudsman Service limit on what for many advisers was an already hardening PI market.”
Gaining a comprehensive picture of the market is a positive step in mitigating the potential risk and impact, he adds.
By gathering data from PI insurers directly, the watchdog could have a better sense of emerging trends.
Richards says: “Hopefully this kind of data gathering won’t replace the conversations the FCA is already having with the PI insurers.”