Professional indemnity insurance (PI) will be more expensive and more difficult to get with only four to five providers in the market, a panel of industry experts has said.
While some professions have up to 38 underwriters providing PI, the financial planning industry has four of five, Dual Australia national underwriting manager Leo Abruzzo told delegates at the FPA Small Principals Conference in Canberra yesterday.
Since QBE has pulled out of the market, underwriters in the financial planning industry can afford to be more selective, Abruzzo said.
“Underwriters are paying claims. My largest claim in the last four years was a financial planning claim and all underwriters in the market have had substantial claims from financial planners in the market,” he said.
“Premiums will go up in this industry. You will face higher premiums.”
Financial planners have until July 2008 to obtain PI insurance which includes higher Financial Industry Complaints Services monetary arrangements.
However, the policy from the middle of the year when the regulations kick in is less than what you will be expected to have in 2010, ASIC acting director of regulatory policy Joanna Bird said.
“Listen to the FPA and insurers and go out and get the best you can now but hope to get better in 2010,” Bird said.
The occurence of the MFS, Westpoint, Basis, and Fincorp disasters over the past four years will contribute to an increase in PI claims, Alexis principal Christina Kalantzis said.
“I think PI will be more expensive for the business owner and you need to know what you’re covered for. Don’t rely on your broker, read it yourself”, Kalantzis said.
Licensees are responsible for undertaking they have adequate cover.
“Risk depends on what you are comfortable with. You need to analyse what you are comfortable with,” she said.
