The Personal Finance Society (PFS) has put together a buyer's guide for advisers on professional indemnity (PI) insurance, with top tips on what to look for when choosing cover.
The guide, produced in association with Howden Windsor, the professional indemnity division of Howden Insurance Brokers, looks at what insurers consider when offering cover, how advisers should complete the proposal form, top tips surrounding the buying process and important features to look out for in a PI insurance policy.
Advice includes starting the process early and ensuring the proposal form is neatly completed and accurately represents the advice business.
If a firm has operated in traditionally high risk areas such as unregulated collective investment schemes or tax mitigation products, they should be prepared to release comprehensive data including products sold, original investment amounts, current values and a percentage that this investment represents of the client's overall portfolio and provide supporting documentation.
Advisers should also ensure their broker understands what risk management measures their firm has in place as this will allow an insurer to differentiate firms which take a less disciplined approach, according to the guide.
If a firm has had claims or notifications, it should provide as much information to its broker as possible including date of notification, amount claimed, a brief summary of the work undertaken, and the alleged wrong doing, accompanied by solicitors' reports on any claims paid.
The guide also steers advisers towards brokers that are experienced and have a long history in placing PI insurance for financial advisers. Advisers should ask for the names of the insurers that the brokers will approach and whether they have a proven track record in this market.
Quotations should be obtained well before renewal date, especially if an adviser is moving insurer, in order for them to become familiar with all the terms and conditions.
Price maybe an important consideration for advisers, but the guide warns to also ensure their broker and insurer have a strong and experienced claims team to provide them with assistance should they have a notification.
Fay Goddard, chief executive of the PFS, said: "Our goal at the PFS is to support members by helping them get the best deal possible, with the most appropriate policy wording for their financial planning firm when looking for professional indemnity cover.
"The cheaper option may seem attractive at the point of sale but the implications of having an inadequate policy wording could have serious repercussions, even sometimes leading to the closure of the firm."
Neil Pointon, director at Howden Windsor, said: "As a broker we see a large disparity in the general awareness in how the PI insurance renewal process works and the variations in cover available.
"We also see a variance in the quality of information provided at renewal and following mid-term alterations during the policy year."
For the guide in full, click HERE.
