FSA challenges PII industry to improve market for IFAs

David Kenmir, Director at the FSA, said:

"We want to improve communication between the PII market, trade bodies and the FSA. This will help us all to resolve the problems IFAs are experiencing. We have invited the PI industry, and trade bodies, to participate in a working group which will tackle the issues in the OFTs recent report.

The group will consider how the PII broking business can be made more transparent and will help insurers understand the issues they should be looking into when assessing IFAs."

The FSA also published today a consultation paper on its proposed PII policy and rules for IFAs.

The new rules will:

• Give firms the flexibility to combine PII policies with their financial resources so that they maintain adequate resources overall;

• set out the essential elements of PII policies but without specifying standard policy wording; and

• enable firms to comply with the Insurance Mediation Directive.

David Kenmir added:

"Our new PII policy will give firms a more flexible framework within which they can choose how to combine PII and financial resources. This will help firms remain in business when the PI market is tight, as it is now, and will continue to protect consumers who may have claims against firms."

Notes for editors

1. CP193 Professional Indemnity Insurance for personal investment firms: proposed policy and rules is available from www.fsa.gov.uk/Pages/Library/Policy/CP/2003/193.shtml. Responses should be with the FSA by 29 October 2003.

2. FSA plans to hold consultative workshops for personal investment firms and other interested parties as part of the consultation process on this CP. These workshops will look at how FSAs proposed regulatory requirements provide more flexibility and what this means for personal investment firms, brokers, underwriters and other interested parties. More information and dates will follow shortly.

3. Challenges raised by OFT included:

   • Better communication between insurers and policyholders

   • Longer renewal periods

   • Initiatives to improve information and risk management to ensure premiums more accurately reflect the risks

   • IFAs to shop around

   • IFAs to improve systems and present their risk more effectively to insurers

4. FSAs Feedback Statement published in June 2003, available at www.fsa.gov.uk/Pages/Library/Policy/Policy/2003/PS169.shtml, set out its vision of the characteristics of a better PII market for personal investment firms. Today's Consultation Paper demonstrates our commitment to improving the PII market.

5. Over 72% of those firms due to renew their PII cover between September 2002 and the end of June 2003 have told us that they now have cover or have obtained a waiver.

6. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection of consumers; and fighting financial crime.

7. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.