The Boutique Financial Planning Principals Group has voiced concerns that a potential lack of competition in the professional indemnity insurance market is a factor in rising premiums for advisers.
Speaking to ifa about the increased costs of PI insurance BFPPG president Wayne Roggero also flagged the role of the regulatory environment in pushing up PI costs.
“I think there are a few factors and it’s just a personal opinion obviously, but I think that there is a lack of competition... also I just wonder whether there’s a concern with FOFA and also possibly that there’s been a number of claims over the last five years or so and they’re trying to recoup their costs,” Roggero said. However, Claire Wivell Plater, financial services and insurance lawyer and managing director of The Fold, said even three providers in the marketplace would be “reasonable.”
“There’s no gouging... insurance doesn’t work like that,” Wivell Plater said. “Yes premiums are high... they’re high because it is high risk business and insurers have been burned and that’s why they’ve exited the market,” she said.
“You can’t say it’s a conspiracy theory or anything, because it isn’t,” Wivell Plater added.
Insurers have lost “a lot of money”, and “won’t want to come back in until they can be satisfied that is a risk that they want to pick up again,” she said.
“Nobody insures Florida for hurricanes.”
Further, even if new insurers come into the market, “they’re not going to be wanting to insure risks that have bad practices, they’ll be wanting to insure good risks,” according to Stephen Hughes, general manager professional services at Strathearn Insurance Brokers.
Is there enough competition in the PI insurance market? Have your say below.
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