Run a search on the Money Marketing website for professional indemnity insurance and you get a host of stories outlining the horror that IFAs have faced for almost 10 years. Doubling of rates, increasing claims and all can be traced back a number of years but the last 12 months have been the worst in living memory.
The PI market has hardened like never before. We have seen some of the main PI providers leave the market. The most recent departure was Chubb and other big-name players such as Matsui and Hanover have walked away.
Why? The increase in claims and payouts due to the debacles of Arch cru, Keydata, etc, and the ongoing issues the FSA raise, such as life settlements and Ucis.
This has left many insurers with massive payouts likely and many have looked to cut their losses and pull out.
What does this mean to IFAs? An increase in premiums and excesses, plus many IFAs not getting full compliant cover.
I do not believe the PI market is going to get any softer in the short term and advisers struggling to get cover this year could fail completely next year.
With the RDR, many questioned how many advisers would get the qualifications but this could be a futile exercise as many may not get the cover to allow them to practise or be priced out of the market.
This is another nail in the coffin for the one-man band. There is too much for most sole traders to do everything themselves with only a paid-for support service sat outside and used once in a blue moon.
Sixfold increases in PI premiums, restricted cover and ridiculously high excesses will not go away in the short term and if the adviser market remains fragmented with small firms not holding central data effectively, not taking on board the latest regulatory guidance to the letter and continuing to distribute products without a massive amount of due diligence beforehand, then this will not improve for many.
IFAs who want to remain in the whole-of-market sector can provide clients with a phenomenal service, an investment expert that can scour the market looking for bespoke solutions but we must look beyond headline rates.
If advisers do not open themselves to compromise or new service solutions to improve their cost base and business, then we will see a much smaller IFA sector.
Tim Sutcliffe is chief executive of Pi Financial