Professional indemnity in 2026: Five trends reshaping risk for financial advisers

The professional indemnity landscape for financial advisers continues to evolve at pace. While capacity and pricing have stabilised compared to the hard market conditions of recent years, the underlying drivers of claims activity remain dynamic.
Regulatory scrutiny, shifting economic conditions and rapid technological development are all influencing the nature and frequency of notifications. In our day-to-day work supporting financial and risk advisers, we are seeing clear patterns emerge.
Below, we explore five key trends currently shaping the PI risk environment - and what firms should be considering to mitigate exposure.

Ongoing adviser charges and annual reviews

In 2025, we saw another rise in notifications regarding ongoing adviser charges on pension funds and client investment portfolios. This comes as no real surprise as the FCA had published articles and asked a handful of firms to conduct internal reviews of their service and annual review procedures, with their findings showing that 2% of customers across their sample had not received contact for an annual review within the prior 7 years. The FCA made their intentions clear for firms to put this right, as such, claims management companies became prolific when advertising on various social media platforms, offering to take forward fee related complaints on behalf of consumers. In most cases, these complaints may not have a huge financial impact on a firm from a loss perspective, however they can take a considerable amount of time to investigate and respond to.

Vulnerable customers 

The FCA’s long-anticipated final guidance on the fair treatment of vulnerable customers was published in early 2021, which provided welcome clarity on this important topic while also setting high expectations for firms. Failure to identify hidden vulnerabilities, such as cognitive decline or mental health struggles can lead to accusations that unsuitable products were chosen because a customer’s true risk profile was not properly understood. Firms can be accused of exploiting clients’ knowledge gaps when advising on complex products such as equity release or Defined Benefit Transfers (DBTs). In March 2025, the FCA reviewed what effect the guidance had made and published their findings. Though it remains uncertain what further changes will be needed to meet their expectations in the future, we are confident that firms will continue to adapt and evolve as they have done previously.

Similarity in mortgage rates across different terms 

Due to economic uncertainty in recent years we have seen mortgage rates for a 2 year deal and a 5 year deal become very similar, as a result, we have seen an influx in complaints due to human errors when advisers have submitted a mortgage application on behalf of their customers. A common scenario would be where the customer had been under the impression that they were entering a 5 year deal, with the advice file showing the same, when in actual fact they had been placed onto a 2 year deal (or vice-versa) at a similar rate and now face potential detriment - due to higher interest charges and unexpected early repayment charges in some cases. While human errors are always anticipated by PI brokers and insurers, they are often preventable with robust procedures and risk management strategies in place.

Use of AI 

AI offers countless opportunities for advisers to streamline the advice process and free up time that can be spent meaningfully with clients, but this must be weighed up against the risks. The alluring ease and speed at which AI completes work can be dangerous when it gets facts wrong, arrives at a false conclusion, or fails to consider the true nuances of a customer’s circumstances. Similarly, if a customer seeks advice from AI, which contradicts that given previously by an adviser, this could encourage them to make a complaint. The FCA is currently taking a ‘technology-neutral’ stance on the use of AI. Rather than introducing new regulations, it intends to rely on existing frameworks to manage the associated risks, hoping these measures will be sufficient. It remains to be seen whether this is a sustainable approach, as we hope firms can continue to innovate and transform customer outcomes.

FOS interest rate amendment

In early 2026, the FOS confirmed that compensation awarded by them for any matters referred on, or after, 1st January 2026 would be subject to a lower interest rate than firms had become familiar with for a number of years. The FOS opened their consultation in June 2025, questions were asked about whether the 8% interest rate applied to awards is reasonable for firms and if this was in line with current market conditions, given that the base interest rate had consistently fluctuated since late 2021 but the FOS’ interest rate always going unchanged. As such, the FOS determined that a fair interest rate to set would be 1% above the average Bank of England base rate – with the start date being when the loss initially occurred to the complainant and the end date being when the redress is paid. It is important to note that the FOS can still impose an 8% interest rate on a firm for late payment of compensation. All in all, we see this is a positive and a much fairer change for financial & risk advisers, who will have found the 8% simple rate unrealistic for some time.

While many of the trends outlined above are market-wide, firms that take proactive steps to strengthen governance and oversight will be better positioned from both a regulatory and PI perspective.

Advisers should consider:

• Reviewing ongoing service propositions and delivery evidence
  Ensure annual reviews are consistently delivered in line with client agreements and that robust records evidence contact attempts, meeting outcomes and client engagement.
• Documenting vulnerable customer frameworks clearly
  Go beyond policy statements - ensure advisers can identify both visible and hidden vulnerabilities, record them appropriately, and demonstrate how advice was adapted accordingly.
• Enhancing file checking and quality assurance processes
  Particularly in mortgage business where product terms can be similar, introduce additional verification steps before submission to minimise avoidable human error.
• Strengthening audit trails and record-keeping
  In the event of a complaint, the file will determine the outcome. Clear rationale, suitability reports and documented client instructions remain critical.
• Implementing governance around AI usage
  If AI tools are used in research, drafting or client communications, firms should establish clear internal controls, oversight and human review processes. AI should support (not replace) professional judgement.
• Monitoring FOS and regulatory developments
  Changes to redress calculations and supervisory focus can materially impact financial exposure. Staying informed allows firms to plan and reserve appropriately.

• Engaging early with brokers and insurers
  Open dialogue around emerging risks, business changes and compliance enhancements can support stronger insurer relationships and more favourable renewal outcomes.

  
  The themes emerging across the financial adviser PI market are not isolated issues - they are interconnected reflections of regulatory expectation, operational resilience and client communication.

  
  Whether it is strengthening annual review processes, embedding robust vulnerable customer frameworks, tightening file-checking procedures on mortgage business, or implementing controls around AI usage, the common thread is governance and oversight.

  
  Encouragingly, many firms continue to adapt proactively. Those that invest in clear documentation, quality assurance and risk management frameworks are not only better protected from complaints - they are also viewed more favourably by insurers.

  
  As specialist PI brokers in the financial adviser sector, we continue to monitor claims trends, regulatory developments and insurer appetite closely. If you would like to discuss how these developments may affect your own PI programme, we would be pleased to help.