It’s no secret that many advisers have found it increasingly difficult to secure professional indemnity cover over the past few years.
With several large insurers pulling out of the market altogether, and a significant increase in scrutiny around renewal and rising premiums, securing PI cover has become a real source of worry for many firms.
We spoke to Daniel Kelly from Onyx Insurance Brokers Ltd, a firm who have a real pedigree in getting cover for advisers, to find out the state of play of PI cover in 2021 and how Money Alive can help as part of a broader strategy around compliance and risk management.
While advisers are used to being in a tough market when it comes to PI insurance, the last few years have seen things becoming significantly harder, creating “an almost perfect storm”, says Daniel.
Trouble really started at the end of 2019 when a number of Lloyd’s syndicates pulled out of the PI market for advisers completely, creating a real capacity problem.
This, when combined with new circumstances arising from the changing landscape of advice; FCA intervention, the ramifications of pension freedoms (particularly around DB transfer) historic losses stemming from adviser claims and of course the increased limit for the Financial Ombudsman Service Compensation Scheme, has made securing cover harder than ever.
While there is cause for optimism as we are seeing new insurers entering the PI market for advisers, it remains to be seen how this will affect premiums and renewal terms going forward.
Suffice to say, advisers are likely to be in a challenging position with PI cover for the foreseeable future which is why it is important to put your firm in the best possible position at renewal.
It goes without saying that insurers are looking for well run firms that pay real attention to detail.
More specifically, insurers are looking to see that firms have impeccable compliance and processes in place which ensure things are done by the book, and done so consistently by all advisers in the firm.
When we drill down into the real detail in, not only DB advice but, retirement income advice as a whole, having the ability to present to an insurer that you have a process in place which provides independent information to clients and collects evidence of that, could be enormously helpful to demonstrate to insurers at renewal time.
With suitability and the potential for adviser bias being key FCA concerns, particularly around retirement income advice, there has never been a better time to assess your processes in this area.
If you haven’t already, you can view our free webinar which discusses the FCA’s thinking and increasing scrutiny around retirement income advice here
We asked Daniel if he felt a system like Money Alive could be an important part of that process.
I think it is. If you’re the type of firm that’s willing to give your clients impartial education on their options, and you have that recorded, that tells insurers a lot about what sort of business you are.
Daniel Kelly, Onyx
While many firms have fantastic processes in place to ensure suitability, consistency and reduce the potential for adviser bias, the truth is that many others simply do not. It can be hard for insurers to clearly differentiate between firms here, being able to point to a solution with a clear record of client engagement could help you stand out. This is especially important in a market where insurers are being so selective - you need to clearly demonstrate why you are a good risk.
While having clear processes around retirement income advice is vital, it’s important to note that using a system like Money Alive to power that process isn’t everything.
Insurers will look at the firm’s history, past claims and a whole host of other factors when coming to a determination about premiums or whether to offer cover.
However, using a system like Money Alive to manage retirement income advice or DB transfer risk can form an important part of an overall compliance and risk management strategy. Having a demonstrably robust process can only help if, at some point in the future, you are looking to sell your business, as it will be more attractive to potential buyers.
Money Alive’s technology allows advisers to send educational videos to clients on topics identified as higher risk by the regulator and track engagement in a simple all-in-one solution.
If you’re an existing client of Money Alive, the good news is that you already have access to our DB and DC box sets. Don’t forget to tell your insurer how you use Money Alive to mitigate risk!
Finally, if you’d like to speak to Daniel about your Professional Indemnity Insurance, or indeed any other Insurances, you can email him at: firstname.lastname@example.org