FSA acts to ease crisis in professional cover
IFAs will face tight new policy terms under FSA modifications to professional indemnity (PI) cover requirements.
Under the modifications, IFAs will pay excess on every claim and the late notifications of claims will be disallowed.
The FSA amended its expectations of standard IFA PI policy conditions after it was inundated by complaints that IFAs could not obtain the mandatory cover in the current hard liability market.
An FSA market review showed IFAs PI premiums had risen by an average of 50% this year and were likely to continue to rise. The modifications will be available for nine months from 1 November and will apply to PI policies taken out during that period.
FSA investment firms division director David Kenmir said PI underwriters had assured him the modifications would increase the availability of cover.
He said the modifications had been granted in time for November, the traditional renewal period for at least 1,200 IFAs. Simplified the modifications are as follows:
Kenmir said the FSA would continue to monitor the PI insurance market.
"If it's judged that the modification has had a positive effect, the FSA will consider making a formal rule change," he said.
The Association of Independent Financial Advisors supported the modifications, which were based on its research.