No Increase in PII costs says FSA

Following today's announcement by the Financial Services Authority (FSA), that the award limit for Financial Ombudsman Service (FOS) complaints is to be increased from £100,000 to £150,000, the FSA have said that this should not impact on firms Professional Indemnity Insurance costs. The FSA says that as there are only a small number of cases currently where the award exceeds the current limit the impact on authorised firms covered by the FOS scheme should be minimal.

However PI Expert is not convinced by this argument. Given that the number of insurers who are prepared to provide cover for IFA's, Insurance Brokers and Mortgage Advisors has shrunk significantly and this is already having a significant impact on premiums, PI Expert's view is that the increase in the maximum award cannot fail to result in premium hikes. Notwithstanding that a higher maximum means that some claims must by definition, receive higher awards, it seems likely that as the bar raises at the top end of the payment spectrum, that the lower awards will also increase in value. Spiraling awards across the board will result in more insurers withdrawing from the IFA/Broker/Advisor Professional Indemnity Market and that can only result in further (significant) increases in premiums, even in the unlikely event that the maximum limit increases do not.

The FSA also announced plans today to undertake a significant review of the financial services industry complaints handling process which it described as being "inherently prone to misuse". The proposal is to scrap the two stage system that currently exists under which customers must first complain to the firm and then wait eight weeks before being able to bring the case to the FOS.

The FSA's director of conduct policy, Sheila Nicoll, said: "Good complaints handling contributes to customer loyalty and should provide the opportunity for firms to put right problems in product design or sales before issues become widespread. But we have found major failures with the way firms handle customer complaints and have since taken enforcement action against two firms as a result of poor complaints practices." The administrative costs of the FSA's proposals to firms are estimated at £24m-£82m a year.

Quite what the FSA intends is not clear, however brokers, advisors and intermediaries who are unfairly carrying the financial can for the cost of investigating complaints in respect of the banks miss selling of PPI policies can only hope that this review does not end up in further unreasonable hikes in the levy.

For further information about Professional Indemnity Insurance or for a PI quotation for mortgages advisors, claims handlers, underwriting agencies, tied agents, loss adjusters & assessors, insurance professionals (general brokers, underwriting agents, loss adjusters and assessors etc) call PI Expert on 01825 745 410 or on line at www.piexpert.co.uk