Firms have five days to report any professional indemnity insurance polices that are not compliant with the new Financial Ombudsman Service award limit.
The limit increased from £150,000 to £350,000 today but there has been a backlash from advisers who say they cannot renegotiate their insurance contracts in such a short time.
At the end of last week the watchdog wrote to firms explaining how they should check their insurance cover in light of the change.
The letter says it is required that personal investment firms take out and maintain professional indemnity insurance that is at least equal to the requirements in the FCA’s handbook (IPRU-INV chapter 13).
This suggests an adviser needs cover to the tune of €1.25m (£1.1m) for a single claim and €1.8m in aggregate to be on the right side of the rules.
The letter goes onto say firms should check if their insurance policy provides cover for the new FOS award limits and speak to their insurer or broker if they are not sure.
It also says firms should complete an online survey within five working days to notify the FCA if their policy does not provide compliant cover or contact it directly.
The letter adds: “We will review your plan alongside other information we hold on you and contact you if we have any concerns or further questions.
“In the meantime, you should urgently progress your plans to obtain compliant cover and let us know when you have done this via your dedicated supervisor. If you do not have a dedicated supervisor, you should let the FCA firm contact centre know.
“We recognise that some firms may be in a position where they need to obtain different professional indemnity insurance following the increase. We may be prepared to allow firms who follow the steps set out above time to make these arrangements. We would expect insurers to deal fairly with firms in this position.”