PII premiums

Lloyds franchise board has stated that 62% of PII underwriters lost money in the last year.  

They say premiums are going up!  

Or are they?  PII brokers sound like estate agents when it comes to talking up their market. 

In reality PII is all about supply and demand, and new entrants will come into the industry, as others leave, and the balance decides the price. 

However the Financial Conduct Authority (FCA) has increased awards that can be made by the Financial Ombudsman Service from £150,000 to £350,000 for advice or services provided on or after 1 April 2019. In respect of advice or services provided prior to 1 April 2019 the award limit has increased to £160,000 and it is proposed that both sums will be reviewed annually against inflation.

This will impact the industry.  While the FCA stated the cost would have been £117m, the insurance industry, led by Howdens, have stated that they haven’t yet finished the review of their historical claim portfolio (limited by binding FOS awards of just £150k) to determine a precise figure.

Some Insurers may Limit FOS awards to a lower sum than £350,000, some may withdraw from underwriting the class and some may just use the opportunity to increase their premium and self-insurance requirements in respect of business advised upon or transacted after 1 April 2019.

Some disruption in the PII market can be expected. Plus ca change, plus c’est la meme chose

IFAC’s immediate worry is that DB compensation payments will be the next card on the table.  Some £23bn has been ‘cashed out', this is truly a Trident Missile sitting under covers.  The annual PI premium from IFAs is worth about £50m.  That is just one fifth of one per cent of those DB transfers