There is an increasing focus on client money protection (CMP), with a failed amendment proposed to the consumer rights bill to make this compulsory for all letting agents, who are already required to protect tenancy deposits.
We understand the principles underlying this type of compensation and the way in which insurance can support it. Not all client money protection insurance is the same.
Historically, it was the professional bodies that protected the client money held by their members with a compensation fund (e.g. The Law Society and RICS). It was open to the professional body and their compensation fund to buy insurance to extend the value of the fund. A trend has recently developed for CMP Insurance to be sold as an extension to a Professional Indemnity policy or bought from a commercial supplier. The terms of these contracts need to be carefully examined as there are often serious exclusions and hurdles placed in the way of a claim.
The only significant claims under CMP Insurance occur where the professional has ceased trading and there are inadequate funds in the client account. The compensation fund/CMP insurance needs to respond when this happens.
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