The Financial Conduct Authority has reported that professional indemnity (PI) insurance premiums in the financial advice industry rose last year by 17%.
The advice sector spent over £110m ($140m, €121m) on PI cover, compared to £94.4m in 2018.
In its retail investment industry 2019 round-up, the UK watchdog also said that average premium for all firms in the advice sector was £24,079.
Financial advice firms generally paid a lower premium the larger the business (see chart below)
The exception being those in the £501,000 to £10m revenue band, where the average premium as a percentage of revenue was higher than the band below.
The FCA data found that, on average, PI insurance premiums were 2.3% of regulated revenue for all firms in the industry.
PI premiums as a percentage of regulated revenue increased in 2019 for advice companies compared with 2018.
The FCA said: “These increases are likely to reflect the changes in the ombudsman award limit and claims experienced by the market.”
In March 2019, the UK financial regulator announced an increase in the Financial Ombudsman Service’s (Fos) award limit to £350,000 from £150,000.
|Revenue band||Total annualised PI insurance premium||Average PI insurance premium per firm||Average regulated revenue per firm||PI insurance premium as % of regulated revenue|
|Up to £100,000||£2,352,756||£2,580||£58,557||4.4%|
|£101,000 to £500,000||£15,386,575||£6,802||£247,151||2.8%|
|£501,000 to £10m||£60,314,021||£43,833||£1,343,831||3.3%|