The FSA's move to improve the fairness of refund terms in payment protection insurance (PPI) policies may lead to a rise in mis-selling claims, a leading law firm has warned.

The regulator announced this week that the PPI industry had agreed to a series of measures relating to 'nil refund' clauses in single premium PPI policies.

The move would see the PPI market no longer apply these clauses which prevent consumers from obtaining refunds if they cancel policies.

Law firm Reynolds Porter Chamberlain (RPC) warned that the FSA's recommendation that firms should contact all existing customers could prompt customers to claim their policies had been mis-sold.

RPC said firms should consider whether they needed to seek approval from their professional indemnity insurers prior to sending out letters to their customers.

Mark Sutton, a solicitor at RPC, said: "There is the potential that this becomes a wider invitation to customers to launch a complaint for the mis-selling of their PPI policies. It is like stirring a beehive."

Steps to eliminate nil refund terms on single premium PPI policies have been in place since 2004.

But an agreement was finally reached between the FSA and trade associations – including the ABI and the British Bankers' Association – to promote the fairness and transparency of refunds.