Independent financial advisers (IFAs) have warned that hundreds could be forced out of business unless the FSA reforms the professional indemnity (PI) market.
According to reports, Paul Smee, director-general of the Association of Independent Financial Advisers (AIFA), said the FSA would need to act decisively to prevent hundreds of advisers being forced to stop trading.
He said: "There is simply an excess of demand over supply. When an IFA can't get cover it is not necessarily a reflection of their business, it is just that there is no cover out there. I am encouraged by their statement but we need action soon."
Yesterday the FSA revealed that 825 IFAs have not confirmed they are covered by PI insurance. The FSA said it would try and address this by liberalising its rules to prevent advisers being forced to cease trading.
PI cover is compulsory for IFAs but capacity has dropped in recent years as insurers have been hit by waves of claims arising from boardroom scandals such as Enron.
David Kenmir, FSA director, said: "We have addressed some of the concerns expressed by the market but only those that don't compromise consumer interests.
"We will be consulting shortly on more flexible requirements and will work closely with IFAs, trade bodies and the insurance industry on the other issues that need to be tackled to improve the PI market for IFAs."
