Professional indemnity insurance providers have been brought together with the FSA following efforts by AMI and AIFA to bring down spiralling PI costs.
The mortgage intermediary and IFA associations say they arranged the meetings to help overcome a perceived lack of understanding of risks involved in the provision of PI cover for advisers.
Paul Smee, director-general of AIFA, says: “In a regulated industry there is an attitude from insurance companies that they are at the mercy of regulators. The FSA is trying to get around this problem by opening a dialogue with the PI market. But more still needs to be done.”
The PI industry is still heavily affected by a downturn that has affected the insurance sector over the past couple of years. Providers say a lack of competition and capacity has increased the level of risk taken on by individual companies.
But John Ellis, head of public affairs at the Life Insurance Association, says brokers and IFAs hold the cover out of a desire to have 'catastrophe insurance' in place, rather than because they actually need it.
He adds: “Unfortunately it seems to have been the mainstay for the payment of claims and major reviews which have been taking place.”
While almost all intermediaries have seen increases in the cost of cover some say the proliferation of large mortgage networks could reduce premiums.
Andy Wilgoss, managing director at Square Mile Mortgages, says: “This issue will be resolved next year when firms become appointed representatives of larger brokerages who can pick up the initial PI cost. We will see some form of consolidation as PI providers may be satisfied on the basis that the bigger the operation, the lower the risk.”