Addressing delegates to the AIOFP national conference on Hamilton Island, insurance broker Peter Carter of Steadfast Brecknock said the problem of PI insurance availability and affordability is unlikely to improve anytime soon.
“Winter is coming,” Mr Carter said. “We are entering another hard market.”
The number of insurers servicing financial advisers for professional indemnity insurance has dropped from about 12 in 2014 to just five in 2017, the broker explained, adding that a number of the existing insurers only service the institutionally-aligned segment and not IFAs.
A number of insurers are seeking to remove “fraud” options from their PI insurance cover, leaving advisers vulnerable to potentially being out of step for the legal liability requirements, he said.
While a number of insurers such as Berkshire Hathaway Specialty Insurance and Chubb have traditionally espoused a preference for large institutional dealer groups over smaller independent and self-licensed practices, Mr Carter said even the bank-aligned sector is facing PI challenges.
“The big firms are facing big increases,” he said. “Some of the big dealer groups are facing 200-300 per cent increases. One of the big banks has had its premium doubled and, considering the size of their excess, that’s a major issue for them.”
Mr Carter said the major client remediation projects embarked on by most of the major institutions have affected their risk assessment and premium figures in the eyes of the PI insurers.
He also suggested that should the incoming single dispute resolution scheme, AFCA, increase the current limit on consumer claims under the regime, this would further scare off insurers from the market.
If ever there was a need and a justification for a PI mutual scheme, the time is right for IFAs. Normally the competition of an ‘open’ market is the best solution for any profession, but in this rare case, a mutual scheme would better serve the industry. It would probably be more expensive but could deliver much better cover, long term stability and therefore less stress.
With only 5 insurers and premiums jumping with more limitations, with resultant anti-competitive regime appearing, perhaps it is time for the Government to step in with its own PI offering. It would be non-profit. It would be fully funded within itself and not reliant upon re-insurers which generally are the problem, I understand. ASIC is becoming user pays so self funded thus $ are released to build the new “Commonwealth Professional Insurance Scheme” which might, just might, mean realistic premiums and clients, advisers and licencees being protected fairly on all counts… cost, cover and compensation.
Yep nice dream Patriot.
Like the government is going to help Advisers. huh huh huh
Tell him he’s dreaming 😥
Realistic premiums? How would the mutual have gone with the GFC and the product failures?
Funny thing is; its the government policy (EDR) that is causing the problem as planners have no defence to unreasonable decisions.
Can things get worse? Sure can. There is reasonable prospect that Labor will win the next election. Any chance they are going to help independent planners? Not a chance when industry funds are financing unions