The Financial Industry Complaints Service (FICS) has opposed a push from the corporate regulator and the consumer lobby to triple the amount of compensation FICS awards to consumers.
ASIC and consumer groups have told FICS that the current monetary limit of $100,000 for non-life insurance claims should be raised to $280,000.
Professional indemnity (PI) insurers, industry associations and dealer groups disagree and want to either keep the current limit or raise it to a maximum of $150,000.
FICS has sought a compromise and is now proposing to raise the limit to $180,000 for non-life complaints from January 1 2008.
It wants to increase this to $280,000 from July 1 2010. It is proposing to then increase the limit for three years based on the consumer price index and every third year thereafter.
The amount awarded for complaints over lump sum insurance is proposed to be increased to $280,000.
“We had to take into account what the industry associations and members have said about the compensation in relation to PI and this gives everyone time to adjust,” FICS chief executive Alison Maynard said.
“We haven’t seen ASIC’s reaction to this yet – ASIC may say that it still doesn’t accept it. We’re hopeful they’ll accept what we have proposed,” Maynard said.
“I’d say it’s a compromise with the members, PI insurers and everyone else.”
The regulator said increasing the limit would bring FICS into line with other ASIC-regulated external dispute resolution (EDR) schemes such as the Banking and Financial Services Ombudsman (BFSO).
Consumer groups told FICS that if it did raise the cap to $280,000 they would be forced to tell consumers to seek financial planners that fall under the BFSO’s jurisdiction.
The FPA fears that a larger increase would hurt small business and cause professional indemnity (PI) insurers to exit the market.
Labor has pledged to raise the monetary limit to $500,000.
Submissions on the new proposals close on September 7.
