Insurance Intermediaries and PI Insurance

The FCA has reviewed the Professional Indemnity Insurance (PII) policies of 200 general insurance intermediaries and compared the cover of those policies against the rule requirements detailed in the Prudential Sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU).

This thematic review is of relevance not only for intermediaries’ own policies, but for those insurance brokers who place PII for other firms.

The review showed that there is sufficient choice within the market. Firms are able to obtain high levels of indemnity where required.

However, in a number of cases, rule breaches or significant concerns were identified:

  • Firms did not have the minimum level of cover required by the rules;
  • Policy excesses that were greater than permitted by the rules;
  • Policies that contained exclusion clauses which gave the FCA significant concerns as their effect could be to reduce the scope of the cover below that required by MIPRU. The four types of exclusion clause were:
    – Suitability of insurer (11 policies)
    – Unrated insurers (2 policies)
    – Non-admitted insurers (13 policies)
    – Insurer insolvency (140 policies);
  • A high level of inaccuracies in policies, particularly the scope of cover for Financial Ombudsman awards and for appointed representatives.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

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Our View

Some of the findings in the review are surprising. It is essential that intermediaries understand the rule requirements and how these are applied in their own policies as well as those they place for other firms.

It is logical to conclude that as issues have been identified in the insurance sector, similar issues may be present in other markets, for example investment (IFA) firms, who are subject to a separate FCA Handbook. 

Action Required By You

  • Read the thematic review here;
  • Check your understanding of the rules (all sectors where you place PI);
  • Check your policies;
  • Review the policies you place for other firms.
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Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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