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Financial Services: Insurance

Treasury written question – answered on 6th February 2020.

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Photo of Nick Smith Nick Smith Labour, Blaenau Gwent

To ask the Chancellor of the Exchequer, what plans he has to raise professional indemnity cover limits which independent financial advisers are required to have to practise.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

The requirement for Independent Financial Advisers (IFAs) to hold adequate Professional Indemnity Insurance (PII) cover is an important element in protecting consumers who receive financial advice. The Financial Conduct Authority’s (FCA) handbook sets out the various requirements around the PII cover that IFAs are required to hold.

There is no intention to raise the minimum PII cover levels for IFAs at present. The minimum limit of indemnity of PII is specified by FCA rules and European legislation such as the Insurance Distribution Directive (IDD), depending upon the type of IFA. The UK is no longer a Member State of the European Union. However, both the UK and the EU are committed to a period of transition – lasting until the end of 2020 – where common rules for businesses and consumers will remain in place, including the IDD.

Many IFAs are in scope of the IDD, because they undertake life assurance type transactions. IDD limits are reviewed every five years via regulatory technical standards and were last reviewed in November 2019 and the revised limits, which have increased slightly, will apply to IFAs that are IDD firms from 12 June 2020.

The FCA are continuing work to examine consumer harms, and potential claims that may arise from certain business activities carried out by IFAs; and these findings may prompt a further examination of the minimum levels of indemnity in the future.

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