‘Being treated like a bad guy is horrible’: IFAs share their PI experiences

Three advisers reveal the trials and tribulations they have faced trying to acquire professional indemnity insurance

Darren Cooke

Director, Red Circle Financial Planning, Derbyshire

Our professional indemnity (PI) insurance renewal was last summer. This time around, I will be starting to have conversations over the next couple of months to give myself plenty of time.

I was due to renew on 1 July, but could not get insurance in place and ended up having to extend for a month. Thankfully, my insurer at the time, Collegiate, was happy to do that. But it was basically exiting the defined benefit (DB) market.

Because I had done DB transfers, they were not offering cover. I had only done about 13 DB transfers over three years, but I did have three British Steel Pension Scheme (BSPS) transfers in there as well, which caused additional problems. I went through a broker and was offered cover by Liberty Mutual, without the BSPS transfers being covered. In the end I managed to persuade them to cover those, but for an additional premium of around £2,000.

My excess went from £5,000 up to £15,000 for DB transfers, so I had to park another £10,000 in the business to cover the excess. My premium more than quadrupled. It had to go up anyway due to increased turnover, but it went up a heck of a lot. A chunk of that was down to the BSPS.

I am stopping doing DB transfers now, because Liberty are not covering the increase in the Financial Ombudsman Service (FOS) award limit. If I do any transfer work that results in a claim, they would only cover £150,000. My response to that is: ‘Well I can’t do that work then.’

It makes no business sense. I am paying money for something I am not getting anything out of.

Darren Cooke

Director, Red Circle Financial Planning, Derbyshire

Our professional indemnity (PI) insurance renewal was last summer. This time around, I will be starting to have conversations over the next couple of months to give myself plenty of time.

I was due to renew on 1 July, but could not get insurance in place and ended up having to extend for a month. Thankfully, my insurer at the time, Collegiate, was happy to do that. But it was basically exiting the defined benefit (DB) market.

Because I had done DB transfers, they were not offering cover. I had only done about 13 DB transfers over three years, but I did have three British Steel Pension Scheme (BSPS) transfers in there as well, which caused additional problems. I went through a broker and was offered cover by Liberty Mutual, without the BSPS transfers being covered. In the end I managed to persuade them to cover those, but for an additional premium of around £2,000.

My excess went from £5,000 up to £15,000 for DB transfers, so I had to park another £10,000 in the business to cover the excess. My premium more than quadrupled. It had to go up anyway due to increased turnover, but it went up a heck of a lot. A chunk of that was down to the BSPS.

I am stopping doing DB transfers now, because Liberty are not covering the increase in the Financial Ombudsman Service (FOS) award limit. If I do any transfer work that results in a claim, they would only cover £150,000. My response to that is: ‘Well I can’t do that work then.’

It makes no business sense. I am paying money for something I am not getting anything out of.

Anonymous

We did a bit of DB work last year, but not masses, and our renewal was coming up around June time. About a month before, I found out the previous provider would not renew, so I had to try six different brokers before eventually getting to a company called Tysers.

Tysers is not really in the IFA space, but I stumbled across it when someone at a dinner told me they had gone through the insurer.

The excess was £10,000 and the minimum premium was £10,000, so I was told: ‘Depending on what level of business you write, the premium might price you out.’ But it was getting a bit late on.

I did have a couple of BSPS cases, but thankfully there were no exclusions or anything like that. The policy was also for 18 months, which was helpful, as I did not want to go through that process again in a year’s time. The experience overall was a complete disaster. Being treated like a bad guy when you are not is a horrible feeling. Despite the fact we put all our processes in front of all these people, they just quite simply were not taking on the risk.

We have never had a complaint, we have never done insistent client work, we have never charged contingently for DB work, and obviously we have never done Ucis or anything like that.

The FOS limit situation is a bit of a joke. I emailed my PI insurer because I had a £150,000 limit on my policy. I told them I needed £350,000 now and they came back to me to say they told the Financial Conduct Authority premiums would go up by 200%-500%, but it had gone ahead and raised the limit anyway. They agreed to increase it to £350,000 without charging us for any of it, which was good of them.

Graham Wingar

Partner, Future Asset Management, Bridgend

In January 2018, just after the BSPS saga, our annual review went through fine. But this January it went up significantly, by around 120%. We had a complete exclusion on all BSPS work, and our excess on DB transfers went up to £50,000 on every case. Those were the best terms we could secure.

We have been with Collegiate since 2004, and our premiums roughly doubled this time. But we were told by other providers that even at around £15,000, they were not able to get close.

We have not heard back from Collegiate regarding the new FOS limit yet. But it has said for any work we have done to date, it will make sure we are covered up to the full FOS limit. For any DB work done after 1 April, we are not covered up to the full limit, but it will provide us with a cost for the additional cover.

Since we are about to be provided with an additional premium, at the moment we cannot really look at any enquiries we get. We have never done many DB transfers, probably only 50 since we started in 2004, so the risk has not increased massively.

Realistically, the newer cases should be a lot better in the insurer’s eyes, because the rules have been tightened up so much that the files are going to be better. We are fairly happy with the old stuff and the new stuff is all good, so we are not too worried.

Share this story

More Content

ADVICE

24 Comments Top 35 Next Gen Advisers: goals for the profession

Top 35 Next Gen Advisers: goals for the profession

In a recent catch up with our Top 35 Next Generation Advisers , Young planners told us the changes they wanted to see to make the profession better. Here are the top 10.

twitter_banner

INVESTMENT