IFAs could see professional indemnity insurance costs soar by over 50 per cent after the departure of major insurers from the IFA market and increasing claims, PII brokers are warning.
In July last year, PI insurer Beazley pulled out of the IFA market due to increasing claims and QBE followed in December, saying the market was no longer profitable.
Mitsui Sumitomo, Markel and Hiscox have all pulled out of the market within the last 18 months.
Howden director of retail Neil Pointon says: “I would not be surprised if those firms represented 50 per cent or more of directly regulated IFA firms at one point. Looking at the market, I can see 50 per cent rises in the price of PI insurance. It is likely if advisers are looking for cover and have exposure to products such as Arch cru or Keydata, they will have specific exclusions in their contracts relating to those products.”
IFA Solutions managing director Jamie Newell says: “IFAs should prepare for rises of 50 per cent or more. For a mid-sized IFA with an annual income of £400,000 or more, rates have been around 1 to 1.2 per cent of turnover. They are now 1.6 or 1.7 per cent or even 2 per cent, depending on the firm.”
PMI Independent Financial Advisers director John Stewart says: “This could be another nail in the coffin for some firms.”