The FCA now proposes to ban this exclusion practice, saying: “We are aware that historically, some PII providers have sought to limit their liability by preventing the FSCS from making a claim on the policy.
“This has been achieved either through a specific clause, or by relying on insolvency clauses which exclude claims that relate to the insolvency of the firm or of third parties.
“Where a firm has, for example, provided negligent financial advice for a consumer to invest in a fund, we do not believe a claim on that firm’s PII should be excluded by virtue of the insured or the fund becoming insolvent, provided the claim has been notified correctly and the product is not otherwise excluded,” the FCA said.
