PI insurers will return wary of planners
The number of professional indemnity (PI) insurance providers is likely to grow again as the frequency and size of claims reduces but planners have been warned that not every service they provide will be included under a PI insurance policy.
Insurance House account manager Ben McDougall said financial planners did not understand why there was currently a lack of competition and providers in the PI insurance sector but that it was the result of PI insurers having to deal with sizable claims from planners on a frequent basis.
"This is a cyclical thing and PI insurers will come back into the market with some dipping their toes in the water again," McDougall said.
He pointed out that while some PI insurers were no longer taking on new business it did not mean they had withdrawn from the market completely and were still proving PI cover to existing clients.
He said with the withdrawal of some PI insurers planners were overlooking issues of legacy risk and retrospective dates and encouraged planners to consider run-off cover that was appropriately dated to deal with any past events.
Abraham Tavares, senior account manager with Insurance House, said underwriters were taking a more favourable view of practices that could clearly show what services they offered and the possible risks in the advice but even then would not cover every service.
"Not everything a planning practice does is insurable and advisers need to check first with their licensee if they are allowed to offer those services. If the licensee does allow it but the PI policy does not cover it they need to seek extensions and ensure this is clearly defined," Tavares said.
"Where this does not happen is evidenced by disputes heard at the Financial Ombudsman Service, in the courts and with underwriters directly."
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Jason Spits
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