2plan chief executive Smallwood said the rise in PI premiums is being made worse by individual, directly authorised, advisers failing to keep abreast of compliance.
He added that these mistakes are ultimately leading to an increased number of claims made against advisers by clients.
Smallwood said despite restricted advice firms putting forward the idea that soaring PI premiums will cause independent financial advisers (IFAs) to give up their independent status and change to restricted advice, three quarters are still determined to remain independent.
He said: “The nature of the work that advisers do means that they spend the vast majority of their time meeting with clients face-to-face and do not, therefore, have the time to keep abreast of the latest batch of compliance.
“It is for this reason that directly authorised advisers find themselves falling foul of compliance issues."
He also criticised claims that advisers are giving up their independent status.
“I am afraid it is only the big restricted advice networks that are claiming this to be the case.
“The statistics most certainly suggest otherwise and point towards independence as the preferred route for the vast majority of advisers.”
2plan said a survey commissioned by Harrison Spence Partnership revealed that 62% of IFAs have continued on a business as usual basis post-retail distribution review (RDR), while 16% have found alternate ways of serving lower-value clients, and a further 22% saying that they had been in a position to turn lower value clients away.
It added that these findings contradict the widely held prediction that there would be a post-RDR rush among IFAs to become restricted in order to avoid the extra requirements necessary to remain independent.
Earlier this week, research carried out for the Association of Professional Financial Advisers (APFA) revealed that fewer than 10% of financial advisers have been offered a decreased PI insurance premium this year, pointing towards a hardening insurance market.
The research found that one in three advisers had been offered an increased premium, while 44% received the same rate as last year.
APFA said the findings further highlight the need for a “long stop” for advisers.
Director at APFA Chris Hannant said: “These findings offer further evidence of a hardening insurance market for advisers, driven by a compensation culture and the legacy of events like Arch Cru, Keydata and Catalyst.
