I read the recent article, Angry IFAs throw PI in FSA's face, with interest.
One aspect not covered, which could have the effect of dramatically reducing premiums for many IFAs, is the level of cover demanded by the regulator.
We are a medium-sized IFA, with 20 advisers, operating in the South-west of England.
Our business is made up of mainly smaller cases – last year, for example, we did 1,567 transactions. Because of the level of our turnover, we are obliged to take cover for £3m for any one claim (or aggregate basis). It is on this level of risk the premium is calculated.
We estimate that, due to our type of business, the maximum individual claim we are ever likely to experience would be in the region of £100,000.
We did minimal business in the contentious areas, such as pension transfers, FSAVCs, endowments, yet we are forced to pay the extortionate ever-increasing premiums inflicted on us by the underwriters who seem to have little perception of the real risk. In this regard, I agree whole-heartedly with the comments of the other industry contributors in the article.
There are many other IFAs around the country in our position, who do not enjoy the higher-quality business experienced in London and some other financial centres, where undoubtedly the level of prospective claims would be considerably higher.
With all the other changes facing our industry, a more realistic approach to PI and premium levels is required.