How to get professional indemnity as a financial adviser.
If you’re an adviser, you’ll know that maintaining compliant professional indemnity is one of the greatest challenges advisers you’ll face in 2021.
The number of insurers who underwrite this kind of cover have been drastically reduced. Restrictions and limitations on cover that’s available are increasingly common.
Money Marketing, the leading publication for financial advisers (and compliance professionals) featured our latest article looking at this issue by our director Vicky Pearce.
Getting PI cover as an IFA
The availability and scope of PI cover is such a growing issue in the marketplace the official trade body for compliance consultants, the Association of Professional Compliance Consultants (APCC) – of which we are a member – is now placing great efforts on behalf of its members (who collectively advise more than 15,000 regulated firms) to bring about more choice and clarity for advisers.
By working with the regulator, PI providers and its members the APCC it is helping to voice the concerns in the marketplace and work towards solutions.
In the meantime, there are five key things that advisers should do when arranging PI cover. You can read the full article over at Money Marketing.
As the saying goes, fail to prepare, prepare to fail. Gone are the days when you could leave looking at your PI renewal to a couple of weeks before it was due.
You should begin your application four to six months before renewal, engage with your broker, obtain a copy of the form, and prepare your submission. Giving your broker more time enables them to negotiate with providers, present the best case and get you the best deal.
2) Be informative
The presentation of your application will have a significant bearing on the cover you are offered.
In the current climate you need to ensure your application provides all the information insurers need to assess the risk your business poses. This means fully completing the application form. If there isn’t enough room on the form to answer the question comprehensively you should ensure that you add it into the cover letter.
Insurers are increasingly interested in the way a firm operates its systems and processes and providing evidential documentation proves to insurers that you take regulatory responsibilities seriously.
3) Push back if necessary
4) Shop around
There are relatively few providers in the advisory PI market and having a history with a selected insurer does provide them with an element of comfort to extend renewal with ease. On this basis we wouldn’t recommend firms actively switch PI companies purely to secure a reduced premium.
We would however recommend you obtain a comparison quote from another insurer. For those who are just looking to reduce the premium or remove an exclusion or restriction, securing an offer for alternative cover can provide a useful bargaining tool.
If your existing insurer isn’t prepared to budge on the exclusion/restriction, particularly if the exclusion means that your firm won’t have compliant cover to carry out your regulated activities, then switching insurers may be the better option.
5) Get a good broker!
While there are few underwriters of PI cover for advisory firms, there are many insurance brokers. You need to ensure your broker fully understands your business and the risks involved, has full access to the marketplace of underwriters and is adept at adding secondary cover where exclusions may apply to your principal PI cover.