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Do you trust PI insurers

12th Jan 2010
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A few years ago I was md of a large financial advisory firm (we had 190 advisers). One of our competitors had a problem with the pension review. The idea of the pension review (for those of you old enough to remember such things) was that where an adviser an advised a client to take out a personal pension they had to report back to the fsa that there was no occupational scheme available. If there was (or there had been advice to opt out of a company pension scheme) the adviser had to go through a defined process to see if there had been any loss to the client.

The process started off with a compliance assessment ie was the advisory letter sufficiently robust to make sure that the client took an informed decision. If the compliance assessment failed then they went straight to loss assessment The problem with the compliance assessment was the goal posts had been moved by the PIA and what was compliant in 1988 was no longer compliant in 1996. My competitor on discovering the issue immediately notified his PI insurers of circumstances that were likely to lead to a claim. The PI insurer said “I do not agree that these are circumstances that are likely to lead to a claim” – meaning I am not going to pay out. At renewal date cover was refused the firm was left without PI cover. (End of business, insolvency and everything else followed) as no one else would touch them.
It led me to a deep distrust of the PI industry – since then having met over 400 firms of accountants in the last four years I have not had my faith restored. I saw one situation where an accountant notified of a potential circumstance (which led to nothing) and saw his premium go up from £2,000 to £10,000 at a stroke. Fortunately I was able to put him touch with a broker who got the premium back down. What can we do about this? The answer is bring commercial pressure to bear on the insurance companies. I would therefore be very interested in hearing from accountants who have problems with insurance companies and also if any of you need of a good broker who is not afraid to fight for you let me know.  I know a man who can!  I can be reached by going to http://www.smithkennedy.co.uk/
In the meantime – happy tax return season.
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