Ministers and regulators must step in to rescue the professional indemnity (PI) market for advisers, Royal London director of policy Steve Webb has said.
Speaking at The Great Pension Debate in Port Talbot, former pensions minister Webb (pictured) expressed concerns that upstanding advisers will be forced out of business by escalating PI costs relating to defined benefit (DB) transfers.
‘It seems to me that if the PI market crumbles, we’re all stuffed,' he said. 'If you’re a minister who wants good outcomes for consumers, good quality advisers not being able to get insurance for what they do is not a good place to be.
'I want to see ministers, regulators getting much more involved to try and make sure that people who are doing the job properly can get affordable insurance.’
PI costs have been rising for advisers since a number of firms were censured by the regulator over advice given to transfer out of the British Steel Pension Scheme. In June New Model Adviser® revealed that advice given to members of the scheme was being excluded from PI policies by some insurers.
In many cases firms have faced rising PI costs to cover DB transfer advice even when they have not advised any British Steel clients.
Transfer specialist O&M Pension Advice was forced to close in May this year when it was unable to arrange PI insurance on 'commercially acceptable' terms. National advice business Mattioli Woods also recently stopped offering DB transfer advice as a result of rising PI costs.
New Model Adviser® also reported last week that one adviser had gone through six brokers before securing a new PI policy.
Webb suggested PI insurance was ‘almost certainly not on ministers’ radar’ so pressure needs to be created to bring attention to it.
He said: ‘I think they will think of that as something to do with businesses – it’s a business cost, businesses have a relationship with an insurer, it’s a commercial market, what’s it got to do with government?'