The supply of cover became so tight that firms who had to renew towards the end of the year could find it impossible to obtain cover, as would those who failed to engage early ahead of their renewal date.
The PI market remains broken. Although the FCA has driven out some of the advice firms who it believes were offering the worst advice, providing PI cover for DB transfer advice remains a high risk activity and some providers have withdrawn altogether.
Some will only offer renewal terms to existing customers, leaving advice firms little option to shop around if they face a hike in premiums at renewal.
We urgently need creative thinking from the FCA to make sure that affordable cover is available to high quality advisers who want to do the right thing.
The publication of the FCA’s Defined Benefit Advice Assessment Tool offers one glimmer of hope in that it provides some transparency on how suitability of past advice is being assessed.
But the FCA remains rigid when it comes to other options such as allowing firms to ‘self-insure’ by setting aside capital for future claims.
A root-and-branch review is needed to avoid a situation where advice firms are a captive market with a take-it-or-leave it situation when it comes to obtaining PI cover for DB transfer advice.
Steve Webb is a partner at consultants LCP
