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Insurance Doctor: Coronavirus (Covid-19) – the market

Continuing our series on the IFA’s guide to Professional Indemnity insurance, Daniel West of  Apex Insurance looks at the implications of Covid-19 on adviser firms’ insurance considerations with particular regard to complaints due to financial losses.

The UK economy is no stranger to economic challenges, the aftermath of Black Monday in 1987, the recession of 2008, and more recently Brexit to name a few. The costs and losses related with these events sit vividly in the memory and the impact of Covid-19 is likely to be different but no less damaging.

The crisis has prompted countries all over the world to place huge restrictions on the movement of people and business to try and curb the spread of the disease. Inevitably, this has led to the market declining, and as a result, clients have seen the value of their investments reduce. As we know, whenever there are financial losses, claims are sure to follow.

We have already been contacted by a number of our IFA clients notifying us of complaints against them from dissatisfied customers due to financial losses.

I have undertaken a review of a selection of policy wordings and have found the conditions and exclusions of the wordings largely fall into one of three categories:

1. Specific investment exclusion

The majority of the policies I reviewed contain a specific exclusion relating to investments, this excludes losses in investment due for depreciation or loss arising solely from fluctuations in financial markets. If you receive a complaint from your client and your policy wording contains this exclusion, then you should still notify the matter to your broker. You may be asked to undertake an investigation as to why the client is in this situation, if it is simply because of the performance of the markets and not due to an error or omission then your notification may be declined.

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