IFAs outraged at FSA claim limit announcement

Stating that the move may have the end result in raising professional indemnity insurance premiums for it, the IFA industry recently expressed outrage at last week’s announcement from the Financial Services Authority detailing the increased Financial Ombudsman Service claims limit.

Decried as an unnecessary and unwelcome decision on the part of the FSA, IFA industry spokespersons accused the authority of taking active steps to encourage costly and time-consuming professional liability insurance complaints against IFAs.  The new FOS claim limit will rise by £50,000 to its new high of £150,000 thanks to the FSA decision.

Clients have been encouraged to make manufactured or false accusations against IFAs already, according to one PanaceaIFA survey conducted earlier this May.  Nearly two out of every three IFAs polled in the survey reported experiencing false business liability insurance claims from clients.

Alan Lakey, a partner with Highclere Financial Services, remarked that while there had been discussions concerning a limit rise for more than a year, last week’s announcement from the FSA was still quite unwelcome.  The FSA’s argument is that the current limit has stood for a decade, added Mr Lakey, and while inflation may need to push it up, he disagreed with the unrestricted nature of the FOS and fears that increasing consumer awareness will only work towards the encouragement of complaints.

Philip J Milton & Company’s managing director Philip Milton also commented by stating that this new rise is simply not necessary.  Complaints have always been permitted to be taken to the courts, he remarked.

One FSA spokesperson stated that the increase was to make sure consumers had the proper amount of protection, as the FOS limit had not seen an update since 2001.  She additionally said that due to inflation, £100,000 in 2011 is worth significantly less than £100,000 in 2011 pounds.

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