The FCA recently released the results of its thematic review of general insurance intermediaries’ professional indemnity insurance which can be found here.
General insurance (GI) intermediaries are regulated pursuant to section 3 of the Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU), which requires GI intermediaries to purchase professional indemnity insurance on minimum terms and with minimum limits for their own protection and that of their clients.
The FCA undertook this thematic review of 200 sample GI intermediaries to assess the extent to which they met the requirements of MIPRU 3. The findings of the review were as follows:
- Cover is generally available for GI intermediaries – there are nearly 60 market participants providing such cover, and cover is mostly available for the range of GI business.
- High limits are available within the market. A number of firms bought insurance far beyond the minimum limits of indemnity. A small number of firms did not have the minimum level of cover required or had a policy excess higher than the maximum allowed. However, these firms appear to have addressed the deficiency during the course of the review.
- A number of policies contained exclusions which concerned the FCA, specifically those related to the insurers from whom the GI intermediary was obtaining cover: (i) suitability of insurers, (ii) unrated insurers, (iii) non-admitted insurers, and (iv) insurer insolvency. Firms and their insurers were recommended to consider carefully whether the exclusions in their policies complied with the minimum terms required.
- The review also looked at cover for appointed representatives. Some of the firms surveyed had ARs on the FCA register but their insurance cover did not specifically cover such activity. Such cover did not meet the requirements of MIPRU.
- The majority of policies contained explicit cover for financial ombudsman awards, but in some cases the sub-limit fell below the maximum award of £150,000. Other policies did not explicitly mention FOS awards, which is potential a breach of MIPRU.
- Some policies were inaccurate and needed updating – some included exclusions which, as drafted, excluded GI mediation.
The FCA has provided feedback to and engaged with the firms surveyed to ensure they are compliant with MIPRU. Other firms are expected to be proactive and review their own cover or risk censure.