Insurance companies may see a rise in professional indemnity (PI) claims from advisers as a result of their involvement in the failed Timbercorp and Great Southern managed investment schemes (MIS).
"It is possible that there will be a rise in claims," a CGU spokesperson said.
Despite the possibility of increased claims, CGU has no plans to stop offering PI insurance to financial planners. However, the spokesperson wouldn't rule out a rate adjustment for advisers.
"We initiated this for professions we judged to be exposed to an increased risk of claims as a consequence of the global financial crisis. The changes may not necessarily be increases in premiums, but could relate to variation of terms, like excess for example," the spokesperson said.
There has not been any upheaval from the underwriters as yet but it is early days at the moment, according to Apex Insurance Brokers account manager Abraham Tavares.
However, regional planners may be of particular interest, he said.
Given the companies are involved in agribusiness, regional planners will be affected because they tend to stick with what they know, he said.
While planners have been attacked for encouraging investors to put money into MIS schemes, FPA chief executive Jo-Anne Bloch expected few financial planners to be involved.
"That said, we would want to ensure that if FPA members advised their clients to invest in these schemes, the advice was suitable for the client and their specific circumstances," Bloch said.
According to Bloch, the majority of advisers promoting the schemes were accountants or people authorised by the product issuers to sell their products.
"The last point is of great concern to the FPA and we will certainly be investigating how product issuers can authorise this activity," Bloch said.
Yesterday it was announced that McGrathNicol were appointed as joint receivers and managers of embattled group Great Southern.
The announcement follows the appointment of Ferrier Hodgson as administrators to the group.
