With adviser firms on the hook for unsuitable advice to members of the British Steel Pension Scheme (BSPS), the Financial Conduct Authority (FCA) has written to the firms’ professional indemnity insurance (PII) providers and brokers.
The move coincides with the regulator’s release of the final rules for a redress scheme for former BSPS members who transferred out after being given unsuitable advice to do so.
“Firms which advised on BSPS transfers are required to review their advice,” noted FCA consumers & competition executive director Sheldon Mills in his letter to insurers and intermediaries. “If the advice is unsuitable and results in a financial loss for former BSPS members, firms are required to provide compensation.
“These firms are required to assess the adequacy of their financial resources to meet potential liabilities arising from unsuitable BSPS advice. This assessment includes consideration of the availability of any cover under the firm’s PII policy.”
Mills went on to state: “Insurance firms involved with the provision of PII will appreciate that BSPS adviser firms wish to have certainty about the extent of their PII cover and that it responds appropriately to claims in connection with the scheme.
“Where adviser firms have certainty over their coverage, this will support our objectives of ensuring protection for consumers and ensuring that markets function well, by aiding the smooth operation of the redress scheme.”
According to the FCA, there has been some uncertainty on whether insurance will meet the claims.
“We have now announced that a redress scheme is going ahead,” wrote the executive director, who outlined the watchdog’s expectations. “Therefore, we want firms involved with the provision of PII to understand our expectations in relation to meeting the information needs of their policyholders and how to deal with claims made under PII policies in connection with the scheme.”
The FCA, for instance, expects PII insurers to handle claims promptly and fairly, among other things.
“It is incumbent on you to deliver on your own obligations to insured firms and in doing so ensure that the process works smoothly for all parties without impediment,” Mills told insurance companies.
