When the Fos is involved, any compensation will be calculated by the ombudsman. It is based on the client’s final losses, plus a fairly hefty level of interest, which is applied from the date the incident occurred.
The Fos calculations are binding on an adviser, but not on the client. If the client does not think the compensation is appropriate, they can take you to court and again, if it relates to a DB claim, the award could run to hundreds of thousands of pounds.
PI renewals
Unfortunately, there is no protected no claims bonus in the world of professional indemnity. Each insurer has its own underwriting criteria and rating methodologies, so the specific weight given to each factor may vary.
However, any complaint, whether it results in a claim on your PI insurance or not, is likely to have an adverse impact on your renewal quote. A track record of frequent or large claims is likely to result in a higher-risk profile.
Most policies have a limit on either the value of any one claim, or the overall amount of claims you can make. Inevitably, your premiums will reflect your complaint history — the more you receive, the more you will pay for insurance.
You may find, as a result of a claim, that your insurer excludes certain areas of advice from your policy as they deem the risk is too high. This means, even if you hold the permissions, you are effectively prevented from undertaking this kind of work.
Some insurers insist on having an annual external compliance audit completed as part of the renewal process and will want to see the report. We know of a few companies that have been caught out by this.
They are not mandatory and some advisers do not do them at all, so it comes as quite a surprise when their insurer demands a copy.
The good news is audits can be conducted in a couple of days for a small company, but it takes longer for larger businesses — so do not leave it until the last minute.
Gone are the days when you could put off looking at your PI renewal until a couple of weeks before it was due. If you do not start engaging with your broker and underwriter months in advance, you could run the risk of not securing the cover you require.
Start reviewing your application at least three to four months before renewal, obtain a copy of the application/renewal form and prepare your submission.
