The Association of British Insurers (ABI) has called for the Financial Services Authority (FSA) to define the phrase “mis-selling” as part of its talks on forming an IFA-only professional indemnity (PI) insurer.
The FSA outlined the possibility of selling cover exclusively to IFAs through its consultation paper (CP) 169 entitled Professional Indemnity for Personal Investment Firms.
But an ABI spokesperson said that there are a number of proposals on the table regarding making PI insurance more widely available.
She said: “We all need to think about the short and longer term. The FSA needs to work out the definition of mis-selling because one of the big problems is that the liabilities are unknown.”
She explained that insurers set premiums to cover the cost of claims but as PI liabilities are currently unknown, this in turn will mean that underwriting will become a problem.
She added: “However, there are other issues that surround the matter such as the need for the FSA to define the phrase mis-selling then this could be factored into the premium. Underwriting becomes a problem when insurers don’t know what the liabilities are.”