The Financial Ombudsman Service has jurisdiction to decide complaints brought by eligible complainants against FCA-regulated firms about regulated activities. For PI insurance purposes, the relevance is twofold: a firm’s PI policy normally responds to a FOS award against the firm, and the FOS process itself has procedural and time-bar features that the insurer needs to be told about early.
What FOS jurisdiction means in PI insurance
FOS is the statutory dispute-resolution body for financial services in the UK, set up under the Financial Services and Markets Act 2000. Its jurisdiction covers complaints by eligible complainants about acts or omissions of firms in respect of regulated activities, including financial advice, mortgage broking, insurance distribution, consumer credit and certain general insurance matters.
In PI terms, the relevance is that a financial adviser, mortgage broker, insurance broker or other FCA-regulated professional facing a FOS complaint is facing a binding determination process that operates separately from court litigation. The firm’s PI policy will normally treat a FOS complaint as a “claim” within the policy definition and will fund defence costs and any FOS award subject to the policy terms.
FOS is not a court. Its decisions are made on a “fair and reasonable” basis taking account of the law, regulator rules and codes of practice, and good industry practice. A FOS award is binding on the firm if the complainant accepts it; if rejected, the complainant retains the right to litigate in the ordinary courts.
How FOS jurisdiction works in practice
Eligible complainants. Not every customer can use FOS. The eligibility tests are set out in the FCA’s DISP rules. In broad terms, FOS hears complaints from consumers, microenterprises (businesses with fewer than ten employees and turnover under £2 million), small charities (annual income under £6.5 million), small trusts (net asset value under £5 million), and certain SMEs falling within the SME extension (turnover under £6.5 million and either headcount under fifty or balance sheet under £5 million). Larger commercial complainants must go to court.
Eligible respondents. The firm complained about must be FCA-authorised, or have been at the time of the act or omission. Unauthorised entities cannot be brought into FOS.
Time limits. The complainant has six years from the act or omission, or three years from when they knew or should have known they had cause to complain, whichever is later. They also have six months from the firm’s final response letter to refer the complaint to FOS. Outside these limits, FOS will normally decline jurisdiction.
Award limits. FOS can make money awards within statutory limits that the FCA reviews periodically and tends to uplift over time. As an indicative figure, the limit for complaints about acts or omissions on or after 1 April 2019 has been around £350,000, with higher bands (currently around £415,000) applying to more recent vintages. FOS can also recommend further amounts above the binding limit, which the firm is not obliged to pay but failure to do so is reported. Limits and bands are reviewed regularly so always check the current FOS schedule.
Interest and costs. FOS can award interest on the money award. It can also direct the firm to take specific steps, such as reconstructing a portfolio or compensating for lost benefits, and to pay distress and inconvenience awards in addition to the money limit.
Binding nature. An accepted FOS decision is final and binding on the firm. It is enforceable in the courts as a judgment.
Worked example with realistic numbers
A two-adviser IFA firm with £600,000 fee income carries PI cover at £1.7m each and every claim (the FCA minimum for personal investment firms with that turnover band) with a £2,500 excess. A retired teacher complains that the firm advised him in 2021 to switch a defined-benefit pension to a SIPP, that the advice was unsuitable, and that he has lost approximately £180,000 in projected retirement income.
The firm notifies the complaint to its PI insurer at the point the complainant first writes in. The insurer accepts notification, appoints a panel solicitor to assist with the firm’s eight-week investigation under DISP, and reviews the case file. The firm issues a final response letter rejecting the complaint. The complainant refers to FOS.
After fifteen months in the FOS queue, the ombudsman upholds the complaint and makes a binding money award of £278,000 plus 8% simple interest from the loss date — total around £325,000. The PI insurer pays the award direct, less the £2,500 excess which the firm reimburses. The insurer also pays defence-related costs incurred during the firm’s complaint handling and FOS submissions; these are within or outside the limit depending on the wording.
If the FOS award had exceeded the £1.7m limit, the PI insurer would have paid the limit and the firm would have been exposed for the excess of award over limit — a personal exposure for the principals. This is why IFA firms doing complex pensions work commonly buy above the FCA minimum.
When this matters most
FOS jurisdiction matters at three points in the lifecycle of a PI complaint.
At notification. A complaint that may end up at FOS counts as a circumstance under the PI policy. The firm should notify the insurer at the point the complaint first arrives, not when FOS jurisdiction is invoked. Late notification can be a coverage issue. See our circumstance notification definition.
During the firm’s eight-week investigation. DISP requires the firm to investigate the complaint and provide a final response within eight weeks (or to issue a holding letter explaining further time). The PI insurer often assists with this stage. Decisions taken in the final response letter — admissions, denials, settlement offers — affect the firm’s coverage position and the FOS outcome. The insurer’s input matters.
At FOS submissions. FOS will request the firm’s file, business case and any rebuttal. The PI insurer normally directs the defence — what is submitted, what is conceded, whether to seek mediation. The firm cannot wave the insurer off and run its own defence without risking its cover.
A separate point: FOS jurisdiction is for individuals and small businesses. A complaint from a large corporate client is not eligible at FOS and goes to court. PI insurers usually prefer the court route for high-value claims because of the more rigorous evidence and procedural rules; FOS is a “fair and reasonable” tribunal where lay complainants can succeed on a degree of sympathy.
Common variations and market wording
PI policies for FCA-regulated firms (financial advisers, mortgage brokers, general insurance brokers, consumer credit firms) almost always cover FOS awards. The wording typically defines “claim” to include any demand or complaint, written or oral, alleging liability, which captures both pre-FOS complaints and the FOS process itself.
Watch for:
Award limits sub-limit. Some policies sub-limit FOS awards to the FCA statutory cap that applied at the time of the act or omission. This is usually the same as the FOS limit anyway, but worth confirming.
Distress and inconvenience. Some wordings exclude or sub-limit non-financial loss awards such as distress and inconvenience. FOS can award these in modest amounts (typically a few hundred to a few thousand pounds) but for high-volume firms they add up.
Costs orders. FOS does not normally order costs against either party. Where the firm has paid its own costs (broker fees, expert reports), these are recoverable under PI defence costs cover, not as an award.
Notification triggers. Most PI policies trigger notification on receipt of a complaint or circumstance. A few define the trigger more narrowly (formal FOS referral). The earlier definition is safer for the firm.
Excess application. Some policies apply the excess once per complaint, others once per FOS reference. With a high-volume complaints book, the distinction matters.
Related concepts
FOS jurisdiction is distinct from the Financial Services Compensation Scheme (FSCS), which steps in only where the firm has failed and cannot pay. A firm losing a FOS case stays in business and pays the award; FSCS only becomes relevant if the firm subsequently goes under. See also circumstance notification for the timing rules and utmost good faith / fair presentation for what a firm must disclose to its insurer about complaints in pipeline.
Frequently asked questions
Who can complain to the Financial Ombudsman Service?
Consumers, microenterprises with fewer than ten employees and turnover under £2 million, small charities with annual income under £6.5 million, small trusts with net asset value under £5 million, and certain SMEs within the SME extension (turnover under £6.5 million and headcount under fifty or balance sheet under £5 million). Larger commercial complainants must use the courts. The eligibility tests are in the FCA’s DISP rules.
What is the FOS award limit?
The FOS money-award limit is set by the FCA and reviewed periodically. As an indicative figure the limit for complaints about acts or omissions on or after 1 April 2019 has been around £350,000, with higher bands (currently around £415,000) applying to newer vintages. FOS can recommend further sums above the binding limit. Always check the current FOS schedule because limits are uplifted in line with inflation reviews.
Does my PI insurance pay FOS awards?
Normally yes, subject to the policy limit, excess and exclusions. PI policies for FCA-regulated firms typically define “claim” to include complaints and FOS awards. The insurer pays the award direct to the complainant, less the excess which the firm reimburses. If the award exceeds the policy limit, the firm is personally exposed for the difference. Notify the insurer at the point the complaint first arrives.
How long does a FOS complaint take?
Eight weeks is the firm’s deadline to investigate and issue a final response. After referral to FOS the case enters the FOS queue, which has historically run from a few months to over two years depending on complaint type and FOS workload. Pensions and investment cases tend to take longer than banking and general insurance complaints. The PI insurer funds defence work throughout the FOS process.
Can FOS hear a complaint from a limited company?
Only if the company qualifies as a microenterprise (under ten employees, turnover under £2 million) or falls within the SME extension (turnover under £6.5 million and either headcount under fifty or balance sheet under £5 million). A larger limited company is not an eligible complainant and must litigate in the courts. The same test applies to LLPs and partnerships.
What is the six-year / three-year FOS time limit?
A complainant has six years from the act or omission complained of, or three years from when they knew or should reasonably have known they had cause to complain, whichever is later. They then have six months from the firm’s final response letter to refer to FOS. Outside these limits FOS will normally decline jurisdiction unless exceptional circumstances apply.
Is a FOS decision binding?
Yes, if the complainant accepts the FOS decision it is binding on the firm and enforceable in the courts. If the complainant rejects the decision they retain the right to litigate in the ordinary courts; the firm is not bound to a rejected FOS decision. The “fair and reasonable” test FOS applies sometimes produces outcomes a court would not reach on a strict legal analysis.
What if my firm has closed or de-authorised?
FOS retains jurisdiction over acts or omissions during the firm’s period of authorisation. A complaint can still be brought after the firm has ceased trading, and any award is enforceable against the firm. If the firm has no funds, the complainant may have recourse to FSCS — see our FSCS PI cover definition. This is why run-off PI cover matters for FCA-regulated firms.
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About Apex Insurance Brokers Ltd
Apex Insurance Brokers Ltd is a Bristol-based specialist insurance broker authorised and regulated by the Financial Conduct Authority under firm reference number 724952, and registered at Companies House under number 07014570. The firm advises professional services practices across England and Wales on Professional Indemnity, Cyber and related covers. Contact us at info@apexinsurancebrokers.co.uk or on 0117 325 0027.
Last reviewed: May 2026 by Apex Insurance Brokers Ltd.
Important: this article is general information, not advice on your specific circumstances. For advice on PI insurance for your firm, contact us on 0117 325 0027 or info@apexinsurancebrokers.co.uk.