PI Insurance - to have or not to have

Andy_Schleider

Hi all.

I've been looking into PI insurance following a conversation I had with an IFA who told me they would feel uncomfortable if I didn't have it.

My ToB have been written in such a way that the onus is on the financial adviser to check that everything is correct before it goes out to the client (at the end of the day it's their name on the report!), so the question is, do I really need PI insurance?

If it was £300 (as was mentioned in your outsourcing howwow 2 years ago) then I'd have paid it by now and not bothered asking the question, however it is significantly more than that, and I don't know if I can justify the cost right now.

I know some of you have, but also some haven't, so I'd like to see your rationale for and against if possible.

Thanks in advance for your help

Jona

Surely the IFA firm for whom you are providing services will have PI - so you would be double insuring.....

Sounds like the IFA you have been speaking to is just trying to pass the buck - perhaps not the sort of outfit you want to be working with.

arongunningham

tricky one.

Even if your TOB clearly states you accept no responsibility - would that stop an IFA trying to make a claim against you?

If you don't need to have it, that shouldn't mean you don't have it.

Best waiting for @Nathan or @benjaminfabi to see how they approach this?

benjaminfabi

I don't have any liability. The adviser cannot outsource the responsibility for the function I perform. They can end our working relationship if I'm rubbish!

My tob obliges the firm contracting me to hold sufficient PI to cover any claims any third party might try to make against me.

I agree with Jona on double insurance.

richallum

You don't have a liability to the end client but you do have a liability to your client, the adviser.

We hired a superb solicitor to do our TOB and cap our liability in it but you can't cover everything. You can't stop someone coming after you. If you make a mistake providing your professional service and it costs your client in any way, they have a legal right to come after you.

I didn't have PI for years as (i) no underwriter knew what the hell we did so there was no market (ii) I couldn't see how anyone could come after us. Changed my mind on this in recent years after seeking additional advice about potential liability, underwriters now making a market and some big firms who wanted to work with us having it as a basic hygiene factor when doing their due diligence. It's a cost we now have for something I don't think I'll need to claim on and doubt it would pay out but I'd rather be on the safe side and more advisers are asking about it.

arongunningham

Yep - that's what I was trying to say. "You can't stop someone coming after you"

Andy_Schleider

Come to think of it, my liability is capped as well. At the moment I don't think it is something I can afford, and any successful 'claim' would be much less than the annual premium anyway.

I think that settles it, for now at least!

Thanks for your comments, they have been really helpful

benjaminfabi

@richallum based on your comments would you say you have it because other people like to see that you have it, rather than because you think that you need it?

In other words, is it easier simply to answer "yes" to the question 'Do you have PI cover?' than to say "no" and need to field further questions or lose the business?

richallum

@benjaminfabi I've been happily saying no and satisfactorily answering any questions for more than 10 years but things change.

I'd say it's now 50/50. Based on what I think might happen in the PI world, (especially with DB) if any adviser puts in a claim to their PI the first thing they'll do is see if they can offset the liability elsewhere. That means looking around to see who else can share in the pain. It's there more to support in case something like that happens i.e. having someone on our side in case we get dragged into something.

richallum

Bottom line for me is we have it because we provide advice to our clients as our service and we need to stand by it. It's not because you need it but because as a responsible business you should have it, in my current opinion.