If you’re a well-run financial planning firm, your PI premium has probably come down this year. Perhaps significantly. After years of painful increases, Jonathan Newell, CEO and lead underwriter at BareRock, explains that whilst this relief is welcome and, for many firms, well-deserved, business model resilience matters more than short-term savings.
Here’s what concerns me: too many firms are treating cheaper premiums as the end of the conversation rather than the beginning of a more important one.
The soft market is real
Let’s be honest about what’s happening. The PI market for financial advisers is firmly in soft territory. New capacity has entered the market, competition among insurers has intensified, and rates have fallen at an unprecedented pace. Some firms have seen reductions of 15% to 25%. Broader coverage terms, fewer exclusions and insurers actively competing for business have created conditions that many advisers haven’t experienced in years.
After the brutal hardening cycle that peaked between 2019 and 2021, when premiums doubled for some firms almost overnight, this feels like normality returning. And in part, it is.
But what looks like stability on the surface is masking something more troubling underneath.
The disconnect nobody is talking about
While premiums have been falling, the underlying risk landscape has been moving in the opposite direction. The FOS award limit has now reached £445,000, up from £150,000 before April 2019. That is a threefold increase in potential exposure in just seven years. Complaint volumes remain elevated, with the FOS receiving over 305,000 complaints in 2024/25, and the fundamentals around advice-related complaints haven’t materially improved.[i]
The FCA’s thematic review of retirement income advice found only 67 per cent of files assessed as suitable, with 11 per cent raising suitability concerns and 22 per cent containing material information gaps.[ii] Pension transfer complaints still succeed at rates above 50 per cent.i These are the metrics that ultimately drive claims, and they are pointing in the wrong direction.
The critical thing to understand is the lag effect. PI claims typically take three to five years to surface from the point of advice. The advice being given today will face tomorrow’s significantly higher compensation awards. Many of the insurers pricing aggressively right now haven’t fully priced that disconnect in.
We’ve seen this film before
If you were in the market during 2018, you’ll remember what happened when the cycle last turned. Lloyd’s 2018 Decile 10 review exposed that 62 per cent of syndicates writing professional indemnity were losing money, with some recording combined ratios as high as 138 per cent.[iii] The resulting exodus was swift. Several major insurers withdrew entirely. Firms that had spent years chasing the cheapest premium found themselves scrambling for cover at any price, facing increases of 200 to 300 per cent.
The firms that weathered that storm best weren’t the ones who had found the lowest premium the year before. They were the ones who had built genuine partnerships with their insurers, invested in their risk profile and positioned themselves as desirable risks worth retaining.
What forward-thinking firms should be doing now
The current soft market is a window of opportunity, not a destination. Here’s how to use it wisely.
First, invest in your risk profile while it’s affordable to do so. Strengthening your compliance framework, file quality and complaints handling doesn’t just reduce your claims risk. It makes you a more attractive proposition to underwriters when conditions inevitably tighten. Firms that can demonstrate clean claims histories and robust processes will always find capacity, even in the hardest markets.
Second, stop treating PI as a commodity. The cheapest premium is rarely the best value. Cover quality varies enormously across the market and firms that switch year on year for marginal savings often find themselves poorly positioned when they need their insurer most. A policy that excludes key advice areas or carries restrictive notification requirements can cost you far more than the premium saving.
Third, ask yourself honestly whether your current insurer is genuinely invested in your success. When the market hardens, and it will, you want to be with a provider who knows your business, values your quality and will fight to retain you. If your current arrangement feels transactional, if you’re just a policy number in a portfolio, the soft market is the ideal time to find a better partnership. Moving when conditions are favourable is strategic. Being forced to move when they’re not is painful.
Finally, look carefully at who is actually underwriting your risk. Soft markets attract new entrants offering eye-catching premiums, but not all of them will be here when conditions change. We’ve seen it repeatedly: capacity arrives when the market is easy and disappears when it gets difficult, leaving firms stranded at the worst possible moment. Choose an insurer with genuine pedigree in financial advice PI, one with deep claims experience, sustainable pricing models and a demonstrable commitment to the sector through full market cycles. The cheapest quote from an unfamiliar name is rarely the bargain it appears to be.
The bottom line
PI premiums have come down and that’s good news. But the smart response isn’t to bank the saving and move on. It’s to recognise that we’re in a cyclical market, that the fundamentals suggest the next correction could be significant, and that the decisions you make now will determine your options when conditions change.
The firms that prepare during soft markets don’t panic during hard ones. That’s always been the pattern. And if you haven’t looked at what’s available recently, a soft market is the best time to do it. The window won’t stay open forever.
About Jonathan Newell
Jonathan Newell is Co-Founder and CEO of BareRock, a specialist Professional Indemnity insurance provider for UK financial planning firms. With over 30 years’ experience across PI underwriting, claims and the financial adviser market, Jonathan founded BareRock to challenge the traditional insurance model where quality firms cross-subsidise poor performers. BareRock’s Club membership approach rewards well-run firms with better terms and a genuine partnership approach to risk management.
[i] https://www.financial-ombudsman.org.uk/consumers/expect/compensation
[ii] https://www.fca.org.uk/publication/thematic-reviews/tr24-1.pdf
[iii] https://www.actuarialpost.co.uk/downloads/cat_1/Aon-lloyds-update-redefining-the-future.pdf
