The FSA will consult on increasing the Financial Ombudsman Service’s award limit of £100,000, prompting fears that professional indemnity insurance premiums could rise.
The FOS can currently award a maximum of £100,000 in compensation to individual consumers.
According to the regulator’s discussion paper on consumer complaints, published last week, the FSA intends to issue a consultation paper on the FOS award limit in the third quarter of this year.
PYV chief executive Neil Pointon says any increase in the limit is likely to hit PI rates.
He says: “If there should be a FOS limit increase, it is more likely to encourage additional claims from consumers.
“Claimants will go to the FOS because it is cheaper to sue as there are less legal fees involved, if any. It is handled by correspondence and if they are not happy with the judgement, they can take it to court afterwards.
“At the moment, the purpose of the FOS is quick and easy justice for small claimants. If you start pushing the figures above £100,000, it seems to change the purpose of the FOS and it could incur the likelihood of more judicial reviews. If you suddenly find out that the FOS has found against you and £200,000 has got to be paid out, that is not easy to stomach.”
A FOS spokeswoman says the vast majority of complaints stay under the £100,000 limit.
She says: “Only 0.3 per cent go above and they are usually in relation to general insurance claims involving big medical cases or insurance claims where someone’s house has burnt down.”
Tower Hill Associates director John Lang adds: “What is wrong with the current limit if the vast majority of cases fall under it anyway?”