A professional indemnity insurance broker is to launch a new product in a bid to lower mortgage advisers’ PI premiums, which face a massive hike this year.
Lockton Insurance Professions associate director Phil Smith says it plans to launch a product with a single insurer in the next month which will involve a compliance director doing a one-day audit at the mortgage broker’s office.
The product will charge a fee of around £1,500 for an average-sized broker and around £750 for a smaller firm but Smith says the cost will be returned through the lower premium achieved.
He says: “There are a lot of adverse brokers falling out of their insurance terms and they are the ones experiencing the harsh rates. What we are saying to the insurer is that if we can demonstrate with their files that they are taking a risk-managed approach, then they can treat them more leniently.”
Smith says the FSA’s planned emphasis on mortgage brokers this year has caused PI premiums to rise. Previously mortgage brokers paid a rate of 0.3 per cent, in contrast to the IFA rate of 1 per cent, but Smith says adverse brokers could find themselves being charged a rate in excess of 1 per cent.
Money Marketing understands that one broker with a premium last year of around £2,000 is now facing a premium of £50,000.