For network advisers, obtaining professional indemnity insurance is often part of the package, but, for the rest, it can be a bit of a struggle. IFAonline finds out what your peers look for - and who they look to - to get the best deal...
Professional indemnity (PI) insurance is one of the many areas of advisers’ lives under scrutiny from the Financial Services Authority (FSA).
As recently as September, the regulator urged firms to consider their PI situation ahead of the implementation of the Retail Distribution Review (RDR) at the end of last year.
For firms seeking to remain independent, the regulator stressed the need for them to hold PI insurance which covers them for the “full range of retail investment products” they need to consider, or, where any product types were excluded under the terms of their policies, to hold additional capital as insurance.
How to find the right professional indemnity insurer for your business
This means finding PI insurance that will cover the more esoteric investments independent advisers must at least consider for their clients – including unregulated collective investment schemes (UCIS), venture capital trusts (VCT), structured products and enterprise investment scheme (EIS).
So how do you go about finding the best PI insurance?
Harriet MacKenzie-Williams, adviser at IFA Keystone Financial, found shopping around saved her thousands – and recommended a spot of negotiation when selecting a package.
“The cost differences are gob-smacking,” she said. “It is also good to check who offers what cover, excesses and any exclusions. You can ask to have excesses reduced, and don’t take the first offer at face value. The worst a PI insurer can do is say no to any requests you make.”
For MacKenzie-Williams, by far the best – and not just cheapest - deal she gets every year is from Graham Mansfield at Lockton.
Ewart Matthias, owner of Newbridge Financial Services, recommends Collegiate, after getting several comparisons.
Stephen Davis, managing director at Pacific IFA, is currently using Liberty Mutual, but had to negotiate with the group to get the best deal.
“They tried to charge my firm £48,000 for the year with a £20,000 excess! After a couple of calls via clients – some are insurance underwriters – I got the premium down to £30,000 with a £10,000 excess using the same underlying insurer, which just shows it’s worth the shop around!”
Davis said he has seen PI insurance costs rise “massively” to the point that it may put some IFAs out of business, and the number of exclusions increased to include undertakings for collective investments in transferable securities (UCITS) funds and investments in self invested personal pensions (SIPPs) among others.
Michael Holden, group chief executive at LIFT-Financial group, hands the responsibility of tracking down the best PI cover to his insurance broker, who scours the market with the data the firm gives him.
This article continues…
First mentioned in Cridland Report
Second acquisition of 2019
Guy Opperman has rejected calls to speed up changes to auto-enrolment (AE) despite increasing pressure to boost contribution rates and overall savings pots.
Four key areas to focus on
And 94% for critical illness