Reduced PI premiums offered to Equity Release Advisors
The Equity Release Council said it would offer adviser members reduced professional indemnity (PI) premiums following a warning from the regulator that the market was being scrutinized more closely.
The reduced Equity Release Council rates will initially be offered by Liberty Mutual Insurance Europe SE. Other adviser panel insurers, which he selected with the help of brokerage group UKGlobal, are not offering member adviser discounts at this time.
However, the panel as a whole “recognizes the value of the board’s standards and views the members favorably,” the board added, suggesting that all of its panel providers will strive to find the lowest premiums for its advisers.
Although the council added that because each claim is judged “on its own merits” and because insurers use different rating factors, it is not possible to guarantee the lowest premium on “every occasion”.
“Since our standards were established 30 years ago, they have formed the foundation of the modern stock release market alongside product innovation and consumer demand,” said Jim Boyd, Director General of the Equity Release Council.
“Further growth is on the horizon as capital release products are used to tackle many of the biggest social challenges facing the UK’s aging population.”
PI insurance, which protects advisers against claims for loss or damage made by customers or third parties, was blamed by advisers for peaking last year. Some consulting firms have seen their bonuses rise by up to 900%, due to the pandemic and the continued fallout from defined benefit transfer scandals.
The council also estimated that 76,000 new and returning customers accessed £4.8bn of property wealth last year.
Boyd added that the support of commercial insurers who understand today’s market “is vital” to helping the financial advice community meet this demand.
Earlier this month, the Financial Conduct Authority warned advisers that it will review the stock release market again to ensure it operates in the best interests of consumers.
The watchdog said that with more people reaching retirement, either by owning their own home or with a mortgage, he is considering the work he needs to do to make sure the market “works. good”. This will include checking standards among intermediaries who give advice.
In 2020, the FCA sounded the alarm over inappropriate capital release advice after a review found some mortgage advisers were undercutting the market.
Historically, the term “equity release” has been associated with scandals and customer debt. This is due to a number of cases during the 1980s and 1990s where clients took out a capital release loan only to end up with large debts which were then passed on to their family members.
A capital release loan unlocks a tax-free lump sum of a home’s equity. But unlike its predecessors, an equity loan product today allows the owner to retain 100% ownership of the property. In the past, a capital release loan has seen a lender give money to a property owner in exchange for a share of the proceeds from the sale of their property at a later date.