There are early signs sharp increases in professional indemnity insurance (PII) could be coming to an end as one adviser has seen his premiums drop by 50 per cent since last year.
Phil Billingham, director of Perceptive Planning, said he hopes this could be the start of changes to the high prices advisers have faced in recent years but warned it will be another 18 months before a full picture is seen.
He puts the reduction, in part, down to "going the extra mile" and providing more information than just the application form.
PII is a must for firms and covers them in case compensation needs to be paid out.
Billingham told the FTAdviser: “I was hoping for a decrease but I have to say the decrease was massively more than we had anticipated and was extremely welcome.
“I hope [this is a sign premiums are going down] but I think we’ve got another 18 months before we see exactly what occurs in relation to the British Steel project.”
In 2022, the Financial Conduct Authority (FCA) said compensation would be paid out to former members of the British Steel Pension Scheme who were misled about the advantages of transferring their pension benefits.
Billingham thinks the impacts of this and other firms going under could go either way in relation to PII.
He added: “It is two sides of a swing. What we are seeing at the moment is a handful of firms that are involved in some very dodgy transfers are basically going bust. They are putting their liabilities onto the Financial Services Compensation Scheme so we might find ourselves in a position where the PI insurers are not having the claims levels they anticipated so the premium for the firms that carry on get lower.
“But the other side is this could go up because more liability is dumped into the compensation scheme and we pay higher levies.”
Perceptive Planning has been running for the past 15 years and has not had to claim on its PI Insurance.
This has had a positive impact on the favourable rates offered to the firm this year, coupled with providing more information in the application.
“The feedback that we got from our insurers was that they have had to become more focussed on the business model, not all advisers are the same,” Billington explained.
“We benefited from that because we’ve been with the same insurers for a while and we gave them a lot more information than just the application form.”
tara.o'connor@ft.com
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