Tenfold increases in professional indemnity insurance premiums and restricted cover terms are causing financial advisory firms to turn away clients needing government mandated advice on DB pension transfers, says The Personal Finance Society.
One financial advice firm has seen its PI premiums leap from £3,700 in 2009 to £45,000 in 2019. Another adviser stated it went from a PI cost in 2017 of £22,736 to the best quote it could obtain for 2018 being £112,000.
A Scotland-based advice firm experienced a threefold increase to professional indemnity insurance premiums in January with an increase in excess for DB pension transfers plus the level of cover for future DB transfers was restricted to £160,000 and not the full Financial Ombudsman Service limit.
The professional body says advisers are facing a growing barrage of questions to obtain cover and massive delays in receiving quotes.
Brokers are blaming the shrinking number of PI insurers causing the remaining providers to struggle to swiftly process applications.
Further examples of soaring premiums and restrictions to cover that could cause a financial advice firm to be pushed into bankruptcy by a single compensation claim has also been obtained by the Personal Finance Society include
A Surrey-based adviser who saw a 47 per cent hike in his PI premium at renewal said: “The FCA are quick to make changes, slow to undo the damage those changes inflict on an already beleaguered sector.”
Personal Finance Society chief executive Keith Richards says: “Financial advisers who have never had a single complaint made against them are being frozen out of the defined benefit pension transfer market because of PI premium hikes and restrictions on cover.
“Problems with PI cover are causing financial advisers to exit the defined benefit pension transfer market and limiting the public’s ability to access the financial advice they need to exercise pension freedoms.
“We urge our members to continue to share their problems obtaining PI cover with the Personal Finance Society by emailing PFSNews@thepfs.org.
“We are sharing this evidence with the FCA and HM Treasury as part of our renewed calls for an alternative to the current professional indemnity insurance market and Financial Services Compensation Scheme compensation scheme levy.”
