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PI provider warns FOS limit hike will hit premiums

by: IFAonline
  • 02/06/2011
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PI provider warns FOS limit hike will hit premiums
A professional indemnity (PI) insurance provider has warned the FSA's decision to raise the Financial Ombudsman (FOS) compensation limit will impact on premiums, despite the regulator's assurances to the contrary.

The FSA this week raised the limit to £150,000, up from £100,000.

It said the impact to authorised firms covered by the FOS will be minimal as it expects only a low number of cases where the award exceeds the current limit.

But PI Expert said it is likely that as awards at the top end of the market increase so too will those claims at the lower end, sending payouts, and premiums, soaring.

Jenny Carter-Vaughan, managing director of PI Expert, said a number of insurers are no longer prepared to cover independent financial advisers, insurance brokers and mortgage advisers, and the new legislation will only discourage insurers further.

“A reduction in willing insurers has already boosted insurance premiums

“With the possibility of higher awards the insurance companies will undoubtedly raise their premiums if they decide to offer the insurance at all,” she said.

The FSA is also consulting on scrapping the two stage system which dictates customers must first complain to a firm and wait at least 8 weeks before they can bring the case to the FOS.

Carter-Vaughan said brokers, advisers and intermediaries may be lumbered with carrying the related financial cost through increased levies.

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