Professional Indemnity Insurance under pressure for mortgage advisers

5/06/2008

A City law partner has warned that Professional Indemnity (PI) premiums for mortgage advisers and brokers are likely to "rocket" in light of mis-selling claims.

The advice comes from Jonathan Davies, partner at at Reynolds Porter Chamberlain.

He tells FTAdviser that the Financial Ombudsman Service (FOS) is reluctant to permit cross-examination of individuals who complain to it.

This could allow allegations of mis-selling to be upheld without the possibility of identifying the complainant as a co-conspirator.

He tells the publication: "The knock-on effect is that PI premiums for mortgage brokers and advisers, which are already becoming far more expensive, are likely to rocket even higher.

"Insurers might even refuse cover for some firms."

Mr Davies adds that the issue is compounded by the fact that the FOS can award compensation even where an adviser or broker has acted within the law.

FTAdviser recently reported that the FOS handled 30 per cent more complaints over the past year.

This reflects a tripling in the number of disputes relating to mortgages and banking, the publication noted.

Francois Rio of specialist Lloyd's broker, PYV, added however: "Whilst insurers are aware of these potential problems, we are pleased to still be able to offer highly competitive terms for the majority of mortgage intermediaries using London and Lloyd's markets and especially our exclusive PI facility with Travelers Insurance Co Ltd."


PYV are one of the UK's leading providers of professional indemnity insurance. This news article has been produced by Adfero in collaboration with PYV and its unauthorised use is not permitted.

(c) 2008 Adfero Ltd.

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