A professional indemnity (PI) insurance provider has spoken out about his industry’s reluctance to cover financial advisers, claiming insurers are “one product failure away” from exiting the market.
Only one in 10 PI insurance providers is currently willing to cover the financial advice industry, Ewan McKay, national manager, professional risk at Asset Insure, told the AIOFP national conference in Hobart on Friday.
“Those insurers that do insure planners have never made a profit out of it,” Mr McKay said. “Overall, the PI market has suffered a significant loss over time. Overwhelmingly, they would have been better off if thay had never insured planners.”
Mr McKay – who also sits on the Insurance Council of Australia PI committee – gave the example of QBE, which he said was “caned” by the collapse of Westpoint and will probably “never come back into the [financial advice] space”.
At the same time, Mr McKay conceded there is a fundamental problem in the cost and availiability of PI insurance for financial advisers, given it is a regulatory requirement.
He said that lawyers, regulators and politicians have perpetuated the “misunderstanding” that PI insurance should protect consumers, in order to “fill gaps in the market”.
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