How, in Broker Talkback, could you possibly have 63 per cent think that “the FSA's plan to create a captive insurer of a PI cover can resolve the current PI crisis”?
Look at the answers – “Let's just hope this works,” “Yes, it has got to be worth a try,” -and so it goes on.
There is only one answer to the PI problem – stop treating insurance as a social fund.
Nibbling around the edges of a problem has never ever solved it.
The FSA and its forbears are culpable because they have sought to treat indemnity insurance as a social fund. It is an international malaise, which has got to stop.
The only time that indemnity insurance should pay out is to indemnify somebody against:
Physical financial loss.
Unless and until the FSA leads the way (and I understood that was what it was put in place for) in restoring the balance of insurance funds (which have a commercial basis) and social funds (which have a Government basis), this particular problem will not be resolved either for the financial services industry or the wider implications on employers liability, public liability and directors' liability insurances.
Let us not “hope” or feel it is “worth a try”. Let us assess the problem mathematically and then deal with it properly. No more experiments please.
The current regulatory experiment, as your columns so amply illustrate from the letters of intelligent individuals who live with the problem everyday shows, has failed.
It is not for accountants, Governments, bankers or journalists to solve this problem – it is for insurance people. They should understand the problem.
Even a captive insurance has to be commercially viable. Tell that to John Tiner and his cohorts who have just extended (by what right, I know not)the rights of individuals to complain about their endowment policies at the bottom of a bear market. That should bring more PI insurers back into the marketplace.
Terence O'Halloran Newland,