IFAs' Professional Indemnity

We constantly analyse policy wordings prior to our recommendation so as to align the insurance to clients' specific needs.

Professional Indemnity insurance cover for IFAs has become increasingly costly and difficult to source in the last five years. The claims environment for advisors has become challenging due to increasing numbers of losses from past work, such as tax mitigation products, pension transfers out of defined benefit schemes because of the poor performance of S32 buyouts, and UCISs. Low interest rates, significant cases of fraud and the collapse of a number of providers such as Keydata and Arch Cru have further added to the pressure on Professional Indemnity insurers’ margins, and underwriters are increasingly selective about the firms they are willing to insure.

Buying this insurance is stressful. IFAs have heard enough comment to feel sceptical about the extent of real protection which this or that insurance will provide. They are right to have their doubts; there is no standard PI policy wording for IFAs.

There are huge variations in the quality of cover offered by competing insurers. This compares unfavourably with insurance for solicitors and chartered surveyors, whose regulators enforce minimum standards of cover upon the insurers they approve. Although the prospect of a minimum Professional Indemnity policy wording for IFAs is frequently discussed, it seems that any meaningful widening of the cover currently available in the market would not be attractive to insurers, with the risk that many might choose to exit the IFA sector if a minimum wording were put in place. Therefore the FCA does not stipulate a minimum quality of cover; they’ve left all of that up to you.  Consequently Robertson-McIsaac constantly review the policy wordings on offer to ensure they align with each individual client’s requirements.

IFAs need advice from a specialist PI broker, an expert in this sector who will take time to understand your business and research and recommend the appropriate policy. There is a world of difference between a Negligence and a genuine Civil Liability wording. Our attention to detail in policy wordings is paramount: we recently advised on a policy labelled "Civil Liability” which then redefined "Civil Liability” as Negligence, which the previous broker had completely missed.  

If you would like to find out how Robertson-McIsaac could manage this sensitive issue for you, contact Sebastian.Cutteridge@rmib.co.uk , Ian.Lloyd@rmib.co.uk or Will.Adams@rmib.co.uk or call them on 0191 212 1234.

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Authorised and regulated by the Financial Conduct Authority.