True value
By
Kate Kachor
Mon 12 Oct 2009
The issue of professional indemnity (PI) insurance has shifted up a gear with a jump in premiums for financial planners.
It's an ugly catch-22 for the sector - without PI, financial advisers cannot operate.
They cannot do their job and deliver advice to their clients. They also therefore cannot gain an income.
In the past 12 months, many PI insurers have been spooked by corporate collapses.
With QBE Insurance no longer providing cover for new clients, along with a compressed market of domestic insurers, there are rumours potential claims from the fall of Storm Financial, Great Southern and Timbercorp will push a second, and possibly a third, insurer to follow suit.
In a way you can't really blame the insurers for being disinterested in insuring Australia's advice market. Who would want to insure a sector that costs them too much time and money?
The thinking around time and money is now weighing heavily on the mind of the adviser.
In the past week, more than a handful of advisers have aired their views on the value of PI.
Many have groaned about the amount of money they are forced to pay each year for cover, complaining: "Why should I pay when I've never had a claim?"
As many advisers face renewals for their PI cover, with some firms experiencing premium hikes of up to 40 per cent, the hefty prices they are expected to pay could well price some advisers out of the market entirely.
For many this will mean leaving the industry or being forced to sacrifice their private status and join with a dealer group.
Another catch-22 situation perhaps?
Though interestingly, is it not high on a planner's list to inform their clients about the importance of going back to basics and having all your bases covered?
In may be a little bit of a simple comparison, and by no means do I mean to dilute the dire circumstances some face with increasing PI premiums, though without cover surely an individual planner's business would be worse off?
Advisers, like their clients, pay their cover for a reason - peace of mind.
How are you finding the current premium rates and insurers?
Are you getting a good deal or not?
IFA would be interested in knowing your situation with your PI.
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