TheFinancial Planning Association(FPA) has made two separate moves to assist advisers struggling under the burden of the professional indemnity (PI) insurance crisis by temporarily dropping the minimum indemnity limits and urging planners to lobby the Victorian Government.
In the first move the FPA will, for a period of at least 12 months, reduce indemnity limits from $1 million and $3 million for any one claim and aggregate claims, to $1 million and $2 million respectively.
The reduction in indemnity levels will be in effect for the 2003-04 renewal cycle and will not affect the level of PI insurance payouts, but rather, the number of claims, or reinstatements available in a year.
According to PI Taskforce member and investigations manager with the FPA, Mike Butler, the move reflects the current situation in the market, with almost no PI insurers willing to offer two reinstatements.
“If members can still get the higher levels of cover, that is fine, but this move recognises the change in the market, and as such, will not affect principal memberships,” Butler says.
FPA members have been asked to notify the association if their insurance cover does not measure up to requirements, and has told members it is working on reforming PI insurance legislation.
Butler says he is seeking Victorian-based small dealers to lobby members of the Victorian Government and Parliament in an effort to enact change to PI insurance laws in the state.
Butler says the FPA is also working with Professions Australia, a representative body for a range of occupations, to demonstrate to the governments across the country the impact the spiralling costs of PI insurance is having on small businesses.
“There is already PI insurance legislation in place in NSW and Western Australia and we are pushing for common legislation across all states. If we can get the Victorian Government to follow that lead, it will cover a large majority of those needing PI insurance and would ensure other states would make similar moves,” Butler says.
