The increase to the Financial Ombudsman Service's (FOS) compensation limit should be halted over fears for the professional indemnity (PI) insurance market, the Personal Investment Management & Financial Advice Association (Pimfa) said today.
Sounding the alarm over the potential increase of the FOS compensation limit to £350,000 from £150,000, Pimfa said it was 'disappointed' the Financial Conduct Authority (FCA) had failed to properly assess the impact of the idea on advisers' ability to obtain insurance.
'The impact on the PI [professional indemnity] insurance market was an area of key concern flagged by Pimfa in our submission to the [consultation paper],' the body said.
'We are disappointed that in setting an implementation date of 1 April 2019, the FCA has failed to properly assess the impact on insurance companies and their ability to offer terms reflecting the changes in the compensation limit.
'The FCA must immediately postpone the implementation of the rules and revisit the impact of the increase in the compensation limit on the PI market.'
The FCA announced its intention to push ahead with the proposals in a policy statement earlier this month.
Insurers had told the regulator firms that offer defined benefit pension transfer advice could expect to see increases of 'between 200% and 500%' in their PI insurance bills under the proposal put forward last year.
However, the FCA has claimed that such rises are unlikely. It said the high estimates were based on data from its targeted supervisory work 'that is very likely to significantly overstate the proportion of higher-risk firms in the market as a whole'.