In a letter to FCA CEO, Andrew Bailey, CISI CEO, Simon Culhane Chartered FCSI, acknowledged the importance of ensuring adequate consumer protection.
But he pointed out that professional indemnity (PI) insurers were already facing a hardening market, with the April FOS increase now only serving to harden the market further “by potentially reducing the number of insurance providers but also by increasing costs significantly to advisory firms.
“We are receiving reports that premiums are more than doubling”.
Mr Culhane also said the misconduct of the few seriously should not impact the costs to many CISI member firms, which he said were conducting their business with integrity
He said: “Our members are concerned, many of whom have satisfied the Institute’s criteria for their firms to be accredited, that it is the honest and trustworthy organisations who are forced to shoulder further costs in reaction to misconduct by others.”
The CISI warned in its letter that the burden of increased premiums for its SME members was a serious factor.
“As a result of the rise in the FOS compensation limit, almost every firm is faced with an increased premium, some considerably more and our members, particularly the Financial Planning firms and smaller wealth management firms, are alarmed at the potential ramifications.
“The short notice given to advisory firms and the lack of wider consultation about the potential impact of this rise means that there may be serious unintended consequences as a result”, Mr Culhane said.
The CISI asked the FCA for urgent clarification for its Financial Planning and wealth manager members who may be affected by the increase in the FOS compensation limit.