The FSA says to justify a time-bar it would have to identify wider benefits to consumers and firms, but says it can see no evidence that this would be the case.
The Financial Ombudsman Service estimates that the introduction of a 15-year long-stop would time-bar approximately 2,000 cases a year.
Instead of keeping a long term time bar, the FSA/FOS could implement a mandatory 12 month review of new policies by the adviser to ascertain whether the customer fully understands the nature of the contract that he has purchased. The Key facts containing risk warnings could be re-issued and carefully constructed questionnaires pre-approved by the FSA should be gone through with the customer. This would achieve the following:
An early warning of an inappropriate contract
Improved advice process at the point of sale/advice
Greater confidence in the system
Improved confidence in the FSA’s ability to identify potential problems earlier rather than later
Shortening of the period of potential liability for PI insurers
Lower accumulating potential losses by insurers and adviser firms
Inappropriate contracts would have to be sorted out early in their lives rather than later when the problem will have been compounded by underperformance or increased age or decreased health of the client.
The Sword of Damocles may engender fear but it never promotes confidence.
Justin Thomas Cert PFS, MInstPI Thomas Hall Partnership LLP