An influential adviser is calling on insurers to increase the availability of Professional Indemnity (PI) run-off cover to ease fears over delayed complaints.
Harry Katz, principal at Norwest Consultants, says availability is scarce because insurers are largely unwilling to insure retired advisers for advice given long ago.
It follows confirmation from the FSA last week it would not be re-introducing a 15 year ‘long-stop’, or time limit, on complaints.
“It’s difficult to get hold of [run-off cover] because insurers don’t like commitments running back that length of time,” Katz says.
PI insurance protects advisers financially in the event of “negligent acts, errors or omissions” being made by their practice.
It is designed to meet the costs of defending claims as well as any resultant damages, excluding FSA fines.
However, after an adviser retires, he or she is unprotected against successful complaints.
Currently consumers have a six-year window, from the moment they receive advice, to make a complaint.
However, there is also a three-year opening from when they "become aware" of poor advice to log a grievance. This effectively leaves advisers vulnerable to complaints about advice given any number of years ago.
Despite this, only a handful of complaints received by the Financial Ombudsman Service (FOS) relate to independent advisers. For those received after a 15-year period, it drops to virtually nil.
“If it is such a minimal risk why don’t the insurers loosen up a bit and give us some insurance,” Katz, also the small firms representative on the Association of IFAs (AIFA) council, says.
Some critics describe run-off cover as expensive, limited and unnecessary, particularly for network members.
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From 6 April 2019