The Financial Conduct Authority (FCA) has advised firms to make sure their professional indemnity (PI) insurance policy covers the increased FOS compensation award limit, which kicks in from today.
On Friday, the FCA sent an email to some adviser firms reminding them to double-check their PI policy provides cover for the new Financial Ombudsman Service (FOS) limit, which rises to £350,000 today (1 April).
Professional Adviser understands the email was not sent to all advice firms, and at this stage is it unclear how or why the FCA chose to send the information to those it did.
The email, seen by PA, advised firms to check their PI policy provides cover for the new FOS awards limit and said, if they were unsure about their cover, they should speak to their insurer or broker as soon as possible.
If the PI insurance policy does not provide compliant cover, the watchdog said, firms should complete an online form within five working days to notify the FCA and let it know when the firm intended to obtain valid insurance.
The FCA said it was willing to allow firms that followed its instructions time to obtain different PI cover following the increase. "We would expect insurers to deal fairly with firms in this position," it said.
PII 'worst-case scenario'
From today, financial firms could have to pay out up to £350,000 in compensation to a customer in the event the FOS finds it to be appropriate.
Under the compensation limit increase proposals, complaints where the act or omission in question happened after 1 April 2019 would be subject to the £350,000 award limit. If a complaint was made after 1 April 2019 about an act or omission that happened before that date, the award limit would be £160,000 plus interest in line with the Consumer Price Index.
When the FCA confirmed the rule change last month, it admitted PI insurance costs could rise by between 200% and 500% for advisers in a "worst-case scenario".
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