Money Marketing

28 January 2010

Nicole Blackmore

Advisers who sit written QCF level four exams may get more favourable professional indemnity insurance terms to those who sit alternative assessments, according to PYV.

Managing director Neil Pointon says if written exams are perceived to be more thorough, underwriters may offer better terms to those advisers.

He says: “If there is an argument that written qualifications are a better route to higher qualifications, then underwriters will look to reflect that.”

Pointon adds that advisers who achieve QCF level four through alternative assessments will still receive better terms than they do currently.

He says: “I do not think underwriters will penalise advisers for taking the alternative assessment route because it is still an improvement on the current minimum qualification. But if an adviser has the full written qualification, I am sure that the broker would represent that to underwriters to get better terms.”

Collegiate Management Services head of underwriting Richard Turnbull agrees that advisers with written exams might receive more favourable terms if it is considered the superior route to QCF level four. He says: “It is fair to say that if a particular method of assessment is considered better, that will be reflected in the rates offered to advisers.”

Evolve Financial Planning director Jason Witcombe says: “I think that is fair, it might be an incentive for advisers to get QCF level four via written exams if they want lower PII costs. Firms will have to weigh up whether those savings are of substantial benefit.”

Highclere Financial Services partner Alan Lakey says: “I would not have thought alternative assessments would be a weaker option. In some cases, it may be a more subjective assessment than written exams.”

IFAonline

Author: Scott Sinclair

A forecasted 50% hike in the cost of professional indemnity insurance (PII) is yet to filter through to the industry but will do so during 2010, a leading underwriter says.

London-based insurer Collegiate last year warned of a significant increase in PII costs for financial advisers as a result of increased claims brought about by heavy drops in investment returns.

Although it is yet to see significant price shifts across the industry, it expects that to change during the next year.

Claims have been through the roof, as you would expect really with investment returns down 40%," underwriting director Richard Turnbull says. "But I don't think it has really filtered through yet."

"We said there would be a 50% increase in PII costs and I still think that will be the case."

"The perception of an IFA's advice is very clearly linked to the investment return and, although there has been a mini rally, we are still 30% down on 2007."

Turnbull says he expects the financial sector to see "another Lehman Brothers-type collapse" in 2010, potentially bringing with it a flood of new claims against advisers.

But he is unsure whether advisers have yet to adopt what he calls "better defences" to protect themselves against client complaints and claims. "We'll know more in a year," he says.

Last August Collegiate, which has both underwriting and claims arms and says it insures more than 15% of the UK IFA population, said the number of claims it processed had doubled in the previous 18 months.

It also criticised some PI insurers, as well as trade associations and compliance providers, for being unclear about which exclusions some policies feature and "emphasising price above coverage".

But Turnbull says he has not noticed any major activity on the exclusions front, adding: "Insurers can have whatever exclusions they want".