Will IFA Professional Indemnity premiums rise post-RDR?

Professional Indemnity Insurance premiums could increase as the new regime seems to create heightened environment for the complaints against advisers describing themselves as independent. As per the recent studies, the Professional indemnity insurance premiums for IFAs could increase in the post-retail distribution review (RDR) world.


Industry experts states that the move to a higher professional standards and a tougher set of guidelines over investment will not help in reducing the number of claims against advisers. On the other hand tougher investment guidelines may lead to a rise in the number of complaints.


There is a lot of uncertainty in the market over how advisers will be categorized post-RDR and how this categorization will affect premiums. Insurance experts states that going forward there would be four categories of advisers and the Professional Indemnity premiums may differ depending on the type of advice given.


The advisers that claim to be independent were more likely to see increases in the premiums as they are more likely to see an increase in exposure and increased claims against them. A lot depends on the economic climate as most of the consumers generally did not complain about their funds when they were on the top.


The consumers will also be experiencing economic losses due to the declining economy but they will have to make sure whether they have received bad advice or if they are in the right product. The consumers would have to pay a fixed fee for the advice, which would no longer be based on commission. By all means the consumers would be facing a challenging time ahead and they need to tackle the situation with smart and well planned moves.


The retail distribution review’s revised category of independent advisers would be forcing the customers to go with higher insurance premiums and the independent advisers would experience greater losses. Right now there is the "uncertainty" on how things will roll out and that Professional Indemnity underwriters were taking a watching brief until the situation become clearer.
Right now the insurance industry is seeing "modest rises" in Professional Indemnity and this rise is expected to continue over the next twelve to thirty six months.



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Ammenda Michle

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