Client remediation projects undertaken by the major institutions are adversely affecting the professional indemnity insurance premiums paid by their aligned financial advisers.
Addressing delegates to the AIOFP national conference on Hamilton Island, insurance broker Peter Carter of Steadfast Brecknock revealed the risk assessment for bank-aligned licensees has changed over recent years.
“The big firms are facing big increases,” he said. “Some of the big dealer groups are facing 200-300 per cent increases. One of the big banks has had its premium doubled and, considering the size of their excess, that's a major issue for them.”
Mr Carter said the major client remediation projects embarked on by most of the major institutions and conflicts in the vertically integrated model have pushed up the PI premiums.
More broadly, Mr Carter said the financial advice industry is heading for a “hard market” in terms of availability and affordability of PI insurance.
The number of insurers servicing financial advisers for professional indemnity insurance has dropped from approximately 12 in 2014 to just five in 2017, the broker explained, adding that a number of the existing insurers only service the institutionally-aligned segment and not IFAs.
A number of insurers are seeking to remove “fraud” options from their PI insurance cover, leaving advisers vulnerable to potentially being out of step for the legal liability requirements, he said.