PI Insurance costs not set to rise with FOS awards limit

PI insurance costs for companies will not be impacted by plans to increase the FOS awards limit on complaints by £50,000, said the Financial Services Authority in a recent statement.

Confirming that the Financial Ombudsman Service award limit will be increased to a total of £150,000, the FSA remarked that there will not be any significant impact on the premium prices for professional liability insurance for firms.

After proposing new rules to do away with the current two-stage handling system for complaints, the FSA added that the total impact on firms in regards to commercial insurance costs is highly unlikely to be significant.  This is because the number of cases where redress exceeds the current limit is actually quite small, the FSA said.

Despite these assurances the FSA has also independently proposed a massive overhaul to the complaints handling process of the industry.  The authority remarked that these reforms are critical due to the inherent easiness of misusing the process.

The FSA is currently taking consult on dismantling the two-stage system currently in place.  The system presently requires clients to file a complaint with a firm first before referring their case to the Ombudsman – after an eight week waiting period.

Conduct policy director for the FSA Sheila Nicoll spoke out regarding the issue by saying that proper handling of complaints not only contributes to customer loyalty, but can also provide opportunities for firms to amend issues in sales or product design before they become widespread.

However Ms Nicoll stated that the FSA has found significant failures with the way some firms handle complaints from their customers.  Since the discovery the authority has taken steps to enforce compliance with two firms that had been proven to have poor complaints practices.

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