Financial planners face paying more for professional indemnity (PI) insurance after the industry’s complaints body announced it will raise the monetary limits next year.
The Financial Industry Complaints Service (FICS) said yesterday that it intends to raise the current cap on investment complaints from $100,000 to $150,000, slightly less than its proposed figure of $180,000.
The cap on life insurance complaints will be increased from $250,000 to $280,000.
The increases will take effect from July 1, 2008. This will be the first limit hike in 16 years.
However, the monetary limits could soon be raised further. The Australian Labor Party would enact legislation to raise the cap from $100,000 to $500,000 if it won the federal election, Labor’s financial services spokesman Nick Sherry told investors in March.
FICS said higher limits would take into account the effects of inflation, an increase in the size of complaints and the monetary limits of similar external dispute resolution schemes.
Australian financial services licensees will be able to seek relief from FICS for up to six months after the start date if they cannot negotiate with their PI insurer in time and face a risk of being under-insured. Most polices are valid for 12 months.
“For consumers it will mean increased access to free and independent dispute resolution,” FICS chief executive Alison Maynard said.
“For licensees it is an increase in the service it will give to their clients.”
The FPA has rejected any increase in the monetary limits saying it would hurt small businesses and cause PI insurers to exit the market.
