Yesterday, ASIC revealed the results of its investigation into “small companies that hold an AFSL” and their levels of compliance with PI insurance obligations, finding that just three of the 56 investigated boutiques had non-compliance issues.
Speaking to ifa, John Kelly, an insurance broker and senior partner at McDougall Kelly & Martinis, said the results were broadly reflective of the high rates of PI insurance compliance he sees on a daily basis.
However, while he welcomed ASIC’s monitoring activity of PI compliance, Mr Kelly questioned the narrow focus of this particular probe.
“Why stop at ‘small companies’?” he asked. “There are many medium to large companies that should also be investigated.”
Mr Kelly also questioned the effectiveness of the review based on a technical issue whereby ASIC asks binary ‘yes/no’ questions of licensees that may not give an accurate picture.
“Has it really got to the heart of compliance or is it a surface review that has provided a false sense of compliance?” Mr Kelly asked, based on his scepticism of ASIC’s process.
Where non-compliance with PI obligations does occur, it is sometimes not the adviser but the insurer at fault, Mr Kelly suggested, explaining that there can be “gaps” between cover offered and regulatory requirements.
“The simple fact is that most IFAs purchase a policy and believe their policy is RG126 compliant,” he said. “Actually, no insurer can guarantee its policy is RG126 compliant.”
The broker called on the government to establish a working group with insurance experts and consumers so as to better advise ASIC on the PI market and more effective and accurate investigative methods.
Agree – this was a not a review into PI insurance generally – it was a review into a very narrow issue – my direct experience is that there are major issues with respect to PI Insurance in Australia.
Wouldn’t you have just started with PI brokers?
But ASIC know everything about insurance. They are the experts !!