IFAs have been faced with massive increases in the cost of their professional indemnity insurance, causing an increasing number to quit the industry altogether.
To make matters worse, PI insurers have been narrowing the cover they provide under these contracts. They want to limit their exposure but still market the policies as being compliant. Huge excesses are being imposed on certain risks such as contracting out of Serps and opt-outs from occupational schemes.
IFAs are expressing concern and some say PI policies are not worth the paper they are written on Insurers appear to be making as much money as they possibly can but not making the payouts. The demands on the Financial Services Authority (FSA) have been mounting for some time, to get involved and take action in the PI market.
At last it looks as if the FSA is listening, by asking AIFA to survey its membership to find out IFAs views on PI. The FSA wishes to seriously think about taking action before November 2002, when many advisers face renewal of their PI contracts.
A spokesman for a PI broker says that it is a real problem in getting compliant cover - more so than anyone has said so far - and that there are IFAs who do not have such cover. He believes that the only solution is for the FSA to change the rules.The FSA is trying to redress the balance by recognising other factors such as capital adequacy of individual firms.