Increasing FOS award limit would damage consumers and adviser firms, argues SimplyBiz’s Davy
8 January 2019
Ken Davy, chairman of The SimplyBiz Group, says the proposal to increase the Financial Ombudsman Service’s (FOS) compensation limit from £150,000 to £350,000 will bedamaging to consumers and adviser firms.
Talking to the SimplyBiz response to the recent FCA consultation paper, Davy said whilst the group acknowledged FOS was a valuable resource for individuals as a low cost dispute resolution service, he added that the current FOS limit of £150,000 is “significantly greater than the £85,000 compensation available to the consumer in the event of a banking failure, and I believe strongly that the current maximum compensation level of £150,000 should remain unchanged.”
“The potential for a high value claim to hit an individual business, and the cost of insuring against such a claim, is likely to be prohibitive for the majority of firms.
The potential for a higher value claim being made would be highly damaging to the advice market and significantly increase the cost of PII”, resulting in “a serious decline in the number of advice firms and therefore the availability of advice to consumers,” he argued, “whilst doing nothing to deter the reckless or the criminal advisers or firms from that activity.
“Our discussions with PI insurers indicate that raising the compensation limit is likely to cause further tightening in an already difficult market, with higher premiums, increased excesses on contracts and an unwillingness for insurers to take on further risk. We anticipate that the number of PI insurers will be further reduced and that there will be a dearth of new insurers. None of which will be beneficial to consumers or consumer outcomes.
Davy said he disagreed with “the principles at the core of this proposal, and firmly believe that it will be detrimental to the advice market, firms and consumers”.
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