I was dismayed to see in last month's round table discussion (Features, 16 February) that there still exists a lack of knowledge within the industry of current professional indemnity (PI) product initiatives which now exist to safeguard brokers from costs associated with FSA investigations.
Hugh Price from Hugh James Solicitors rightly points out that the costs of FSA investigations resulting in loss or fine will generally be covered by a PI policy in the case of a third party negligence claim, but no consideration has been given to the loss associated with costs incurred in investigations that have nothing to do with a third party claim.
The potential cost to a broker during an investigation, and before a claim of negligence has even been brought by a third party, can be enough to wipe out the profits of a small firm for an entire year.
Who pays for those costs?
There is a gaping hole in most brokers' PI policies in this regard.
Howden was the first PI broker to recognise this need and last year launched an extension to PI policies which plugs this gap, and a few others have since launched similar offerings.
The policy extension from Howden, for example, will provide brokers with up to £100,000 of cover for costs incurred during official investigations.
The FSA has already made clear that it intends to intensify its scrutiny on brokers and bring more prosecutions this year in its drive against market abuse, making successful claims only half the worry - brokers must ensure their policy will cover the costs whether negligence is claimed or not.
Richard Wynn
Director
Howden
