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PI broker warns advisers against non-disclosure

IFAs are putting their professional indemnity cover at risk by failing to disclose issues raised during FSA visits, warns the managing director of PI broker Collegiate.

Tony Howe says many IFAs are burying their heads in the sand and not providing full information on renewal forms. But he warns that this could make renewal more difficult or cause the broker to withdraw cover entirely.

Relevant information could include the FSA being unhappy with the IFA’s treatment of customers or any other breaches of rules.

Howe says many IFAs are also opening themselves up to risk by taking out cheap non-compliant PI policies.

According to new electronic reporting rules, IFAs have to establish that they have satisfied the PI rules and that their policies are fully compliant.

But Howe says many IFAs are still hunting for the cheapest PI policy despite sharp price reductions across the entire market over the last year.

He says many cheaper policies contain crucial exclusions such as losses due to market fluctuations, which could render them non-compliant.

Howe says: “This is a widespread problem. Many IFAs are still trying to find the cheapest bargains. Some do not even read the policy wordings. How many actually understand the rules and have vetted their policies with their brokers to ensure full policy compliance?”

Innes Reid Investments senior adviser Jim Turner says: “There is still an unhelpful attitude among PI insurers that IFAs are lucky to get PI cover at all, so take it or leave it. It is not unreasonable to expect that PI insurers’ and brokers’ policies are compliant although we still have a duty to check the terms.”

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