One of the few remaining professional indemnity insurance providers to the financial planning market has called it quits, claiming the risks have become too great.
Suncorp-owned insurer Vero – one of the few Australian insurers operating in the financial planning PI space – has confirmed it will cease covering new PI insurance customers in the advice industry from this month.
“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 told ifa.
“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.”
However, Vero client and boutique advice firm principal Michael Pinn told ifa that he has not witnessed an “increasing capacity” in suppliers to financial planning businesses.
“Personally, I am disappointed that Vero are exiting and we are denied the opportunity to underwrite with an Australia-based underwriter after this year,” Mr Pinn said.
“Given the [Tax Agent Services Act] legislation, and comments to the effect that providing financial planners with PI cover for tax advice would not be a problem, you are left wondering.”
Mr Pinn suggested that the exit of Vero may be an appropriate time to rethink the compulsory PI regime for advice businesses.
“It has been promoted by a segment of the industry for some time that compulsory PI insurance has contributed to the problem and that not having PI insurance is not necessarily a bad thing,” he said.
“As underwriters exit the market there may be no option but to review the requirement for compulsory PI insurance.”
Should PI insurance be compulsory for advisers? Have your say below.
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