The Personal Finance Society (PFS) has uncovered new evidence of hiked professional indemnity (PI) insurance premiums and restricted cover.
The professional body suggested such premiums have caused firms to turn away clients needing government mandated advice on defined benefit pension transfer advice.
The PFS also revealed advisers are facing increasing questions to obtain cover and massive delays in receiving quotes, while brokers are blaming the shrinking number of PI insurers causing the remaining providers to struggle to swiftly process applications.
One example of soaring premiums and restrictions to cover – that the PFS suggested could cause a financial advice firm to be pushed into bankruptcy by a single compensation claim – included one advice firm revealing how their PI premiums had jumped from £3,700 in 2009 to £45,000 in 2019.
Another adviser stated they went from a PI cost in 2017 of £22,736 to the best quote they could obtain in 2018 being £112,000.
The PFS also noted that a Surrey-based adviser who saw a 47% hike in his PI premium at renewal said: “The FCA are quick to make changes, slow to undo the damage those changes inflict on an already beleaguered sector.”
PFS chief executive, Keith Richards, said: “Financial advisers who have never had a single complaint made against them are being frozen out of the defined benefit pension transfer market because of PI premium hikes and restrictions on cover.
“Problems with PI cover are causing financial advisers to exit the defined benefit pension transfer market and limiting the public’s ability to access the financial advice they need to exercise pension freedoms.
“We are sharing this evidence with the FCA and HM Treasury as part of our renewed calls for an alternative to the current professional indemnity insurance market and Financial Services Compensation Scheme compensation scheme levy.”
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