One of the few remaining Australian-owned insurers still servicing the financial planning industry, Suncorp’s Vero brand will exit the market, a spokesperson for the bank’s commercial insurance arm confirmed to InvestorDaily.
“A recent product review has determined that the financial planners segment of the professional indemnity market is no longer within our risk appetite,” Suncorp Commercial Insurance executive general manager, commercial portfolio and underwriting management, Darren O’Connell said.
“Vero previously ceased offering cover to new business customers in this segment and has now ceased offering renewals, effective 18 August 2014.
“Vero’s market share has significantly declined over the last two years. There has been increasing capacity in the market over the past 12 months and currently there are a number of insurers offering professional indemnity cover for financial planners,” said Mr O’Connell.
The exit of Vero leaves a small number of PI providers to financial planning businesses, with AIG and Axis the two most prominent following the exit of Dual in 2008.
The move follows comments made by Insurance Council of Australia PI committee member Ewen McKay at the Association of Independently Owned Financial Professionals national conference in Tasmania in November 2012, in which he explained that a dearth of suitable dispute resolution options is leading to the exodus from the financial planning PI space.
“Generally, PI insurers have always been supportive of [external dispute resolution] schemes because they provide a relatively low-cost vehicle for conciliation,” Mr McKay said.
“However, where we diverge with regulators and the [Financial Ombudsman Service] is a growing concern over FOS being used for larger disputes – particularly where there are multi-parties, some that may not come under FOS’s jurisdiction.”
Consumer protection is a “fortunate outcome” of PI insurance, “not its purpose”, Mr McKay added – calling into question the ability of the FOS to effectively resolve disputes in the financial planning market.
At that time, Mr McKay anticipated a further reduction of competition in the PI market if external dispute resolution criticisms are not addressed.
