The FPA has signed up three insurance brokers to form an advisory panel and has warned that exclusions in professional indemnity (PI) polices are putting financial advisers at risk.
Following an extensive tender process, the association has chosen Aon, Indemnity Corporation and Mega Capital to answer member enquiries about their PI policies and to help in finding the best cover. Other firms may join at a later date.
The FPA will not pay the brokers for their advice.
The move follows alarm bells from some members that insurers are imposing unreasonable conditions on their policies.
“FPA members have experienced a worrying trend where brokers have expanded exclusions to PI policies,” chief executive Jo-Anne Bloch said.
“This is a major concern, particularly when these exclusions relate to specific requirements for FPA membership. Not only are members exposing themselves to claims risk, they are also jeopardising their professional membership.”
Bloch said the effect of more stringent conditions on PI policies had the potential to also leave consumers exposed.
Exclusions from PI policies may include run off cover, fidelity, the non disclosure of commissions and claims arising out of the use of non-approved products. Following the collapse of the Westpoint property group, some insurers will no longer cover planners who advise on mezzanine investment products.
Members will be able to access the panel’s details on the FPA website from Monday March 5.
The association will be convening an industry think tank in April to discuss proposed changes to PI insurance after Westpoint, when many investors were left out of pocket due to problems with PI policies.
FPA principal members need a minimum of $1 million in PI cover per individual claim or $2 million aggregate. According to ASIC only around 60 per cent of financial services licensees in Australia hold PI.
