As the new regime begins to create a heightened complaint environment for advisers classifying themselves as independent, business liability insurance costs may soon be on the rise.
PI insurance premium costs may soon begin increasing for IFAs, according to industry experts, in the the post-retail distribution review world. It is still uncertain how the RDR will actually prove to operate in practice, but the majority of experts have stated that the move to adopt a tougher set of investment guidelines and a move to more stringent professional standards will most likely lead to a rise in business insurance complaints against advisers, instead of reducing them in number.
However, Howden Insurance Brokers retail division director, Neil Pointon, remarked that market uncertainty regarding how IFAs will be categorised after the RDR and what kind of affect this will have on premiums. Mt Pointon said that IFAs are still undecided of how the RDR will actually go through or not, what form it will go through, how it will actually operate in practice, and how they will be treated if the RDR does go into effect.
In the post-RDR landscape, Mr Pointon said, there was likely to be four different adviser categories. Depending on the types of advice given, PI insurance premiums may differ quite a bit, he added.
Those advisers that prefer to be labelled as independent may be in store for premium increases under the review. This is because these advisers are considered to be increasingly exposed, which could lead to more claims being brought against them due to this increased exposure.
Many IFAs currently believe that they will end up in the independent category of the RDR, said Mr Pointon, which may lead them to believe that their insurance premiums will be increasing soon.