Get indemnity™ financial advisor insurance
Professional indemnity insurance for financial advisors continues to be challenging as a result of expensive allegations across the industry and the FCA's decision to increase the Financial Ombudsman Service (FOS) award limit.
Firms that are unable to demonstrate robust controls with a good claims history are reluctantly paying increased premiums. We work with Lloyds of London underwriters that can offer competitve IFA professional indemnity terms.
Examples of IFA professional indemnity claims:
Negligent act, error or omission
Misuse of personal information
IFA professional indemnity insurance offers protection against the failure to exercise reasonable skill and care in the provision of professional or advisory services.
What are the FCA insurance requirements for financial advisors?
The Financial Conduct Authority (FCA) requires all firms carry specified minimum levels of professional indemnity for both a single claim and aggregate claims.
The minimum levels are: EUR 1,250,000 for a single claim and EUR 1,850,000 in the aggregate, however it is your firm's responsibility to take out adequate professional indemnity insurance.
For UK based firms, these minimum requirements are translated into sterling and must be met at the date of taking out the policy and at the date of renewal.
Firms should ensure they have:
> continuous cover since the start of your authorisation;
> a policy excess that is no higher than the minimum level specified; and
> cover in respect of Financial Ombudsman Service (FOS) awards.
The FOS award limit increased from £150,000 to £350,000 on the 1st April 2019. The Chartered Institute for Securities & Investment has warned the FCA there may be unintended consequences for its SME members.
The FCA does not recommend any particular IFA professional indemnity insurance broker. However, they do provide a list of distributors that have consented to their publication.
What financial advisor activities carry greater risk?
The exposure posed by IFA's has serious potential for high severity claims. With the principle risk arising from monetary loss attributable to the insureds negligence. The below identifies commonly accepted views on professional activities:
> Medium risk IFA professional activities
> Estate planning
> Home equity release
> Investment advice
> Income draw downs
> High risk IFA professional activities
> Corporate finance
> High profile clients
> Individual investments +£250k
> Mergers & Acquisitions
> Tax mitigation
> Unregulated investments
If your firm operates in traditionally high-risk activities, be prepared to provide additional information to support your application. For example: investment type: amounts; providers; performance; and percentage of your clients investment portfolio.
Clear detail concerning the scope of any high-risk activities will assist in obtaining competitive IFA professional indemnity insurance.
How to obtain the most competitive IFA insurance?
IFA firms should start the renewal process in good time before the expiry date. To obtain the most competitive IFA professional indemnity we recommend you provide copies of your compliance procedures with your application. Insurance underwriters like to see robust procedures and controls to identify, assess and mitigate potential risks.
Preferably this will include:
> details of any external compliance specialist;
> details of your file audit process;
> copy of your complaints register; and
> biographies and qualifications.
Claims are sometimes inevitable, however these should be clearly detailed within a claims schedule highlighting any preventative measures undertaken to guard against recurrence.
At get indemnity™ we are professional indemnity specialists and can assist in obtaining competitive no-obligation quotes from the wholesale market. Please contact us on 0345 625 0711 to discuss your requirements.
What are the market conditions for IFA professional indemnity?
The market conditions for IFA professional indemnity insurance remains stable to hard. If your firm has recent claims history, we recommend you engage with your insurance broker early in the renewal process to ensure sufficient strategic planning.
High-hazard IFA professional activities will remain under pressure to accept premium increases, with less insurers willing to compete. In addition, the FCA's decision to increase the FOS compensation limit has meant a general upwards pressure on renewal premiums.
PI Insurance premiums reported to the FCA
The table below shows the average PI Insurance premiums reported to the FCA by financial advisor firms in 2017:
This guide is for information purposes and based on sources which we believe are reliable, the general risk management and insurance information is not intended to be taken as advice with respect to any individual circumstance and cannot be relied upon as such.