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Principle-based regulation could threaten PI market

The FSA’s treating customers fairly regime poses a danger to the professional indemnity insurance market, says Whitechurch chief executive Kean Seager.

He says the principle-based regulation allows the FSA to make retrospective judgements and leaves firms in the dark about what is expected of them.

Seager says PI providers are already complaining about the danger of insuring companies against indefinable risks and are warning that rates will go up.

He says smaller directly-regulated advisers which have not prepared a TCF plan will be more seriously affected and could find it very difficult to get PI cover.

Seager says: “I believe that the PI providers will have a problem with offering such cover to the smaller directly-regulated IFAs. I urge everyone to contact the FSA to voice concerns about yet another policy that is more suited to big concerns, leaves smaller IFAs at risk and hence is a detriment to consumers.”

PYV chief executive Neil Pointon says: “Whenever you raise the bar and allow more claims to be brought against IFAs, professional indemnity premiums will harden. But it will probably will be some time before TCF causes PI rates to go up as there is always a delay before claims actually come through.”

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