Claim-chasers will struggle to obtain PI cover as specialist underwriters see them as “opportunistic street traders” that are damaging their IFA clients, says a leading PI broker.
Last week, the Department for Constitutional Affairs published a consultation paper on the need for PI cover for claim management firms.
From January 2008, authorised claim-chaser businesses will need cover for individual claims up to 650,000, with an aggregate limit of 1m or 10 per cent of annual income if higher.
PYV managing director Ian Boscoe says many financial services underwriters will refuse to provide professional indemnity insurance cover to a sector that damages their core IFA business.
He says underwriters will not want to encourage the work of claim management companies by offering them protection.
Boscoe says CMCs are seen by many underwriters as the equivalent of opportunistic “street traders” which provoke claims rather than helping the public in dealing with them.
He says that some firms will be willing to step in to offer cover but will inevitably charge high premiums, meaning that CMCs could struggle to find affordable cover if the market hardens.
Boscoe says: “They are unfortunately seen by many underwriters as culturally more akin to street traders than lawyers whose approach is more opportunistic rather than professional and are intent on provoking claims rather than assisting the public.
“Given the fact that underwriters could be involved in insuring IFAs, all sorts of conflicts arise, not least in that they would be promoting claims against themselves.”
Claims Standards Council chairman Andrew Twambley says: “There will always be conflicts with professional indemnity cover and our sector is no different but there are worries over affordability of PI for smaller claim firms that could be forced out of business by high costs.”