Financial Institutions Professional Indemnity Insurance (FIPI) protects the company’s equity capital. It assumes the costs for defence and compensation in the event that the company is legally liable to a third party, usually a customer due to an error in advice or service.
The insurance benefit includes the defence costs for unfounded claims and payments for justified claims for damages. As an instrument of risk management, the FIPI policy secures the result of the financial institution.
Especially since the financial crisis, FIPI has become an important tool for banks to cover their clients’ complaints arising from incorrect advice and misselling. A FIPI policy is available on the market stand-alone or in conjunction with other products such as Crime or D&O; depending on the type of financial institution.
There is a need for advice on the scope of standard coverage extensions, where experience has shown that different views differ depending on the insurance company – for example, the scope of coverage of mitigation costs, where payments for operational errors are covered depending on conditions, or simply the costs of advice and communication. Here it depends on clear structuring of the condition text.