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PI costs predicted to rocket by 50%

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.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. If the FSA were to do its job properly and prevent the succession of motorway pile-ups that seem to have become a regular feature of the FS landscape, regulating thereafter by hindsight, this probably wouldn’t be happening, would it?

    But never mind ~ Adair Turner seems to have the answer. More staff, more resources, more power and, above all else, MORE MONEY. Give us all of those things (well, not give us exactly, rather we’ll just take them off the industry, regardless of anything that the industry might have to say on the subject) and next year we may do better. No guarantees, mind, but we’ll try. Oh yes, and Hector says he’ll try to shout a little louder as the next pile-up approaches.

  2. We have just renewed our PI insurance and have not experienced any hardening in the market, only a modest increase in premium of slightly less as a proportion than our increase in turnover over the past 12 months.

    What I can see happening is it becoming increasingly difficult for ‘risky’ IFA firms to obtain PI insurance at a competitive or even affordable premiums.

    Those firms that have sold esoteric investment schemes, have advisers who are not Level 4 (or even Level 6 qualified) and do not have centralised processes are likely to face the steepest premium rises in 2012 and 2013.

  3. FSCS fees, PI costs, FSA meetings, RDR changes, direct providers poaching, tied agents still ‘free’ advice, ambulance chasers…. on and on it goes.

    Honestly I do look forward to these daily newswires.

    It’s a wonder we’re not all off sick with depression.

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