TheFinancialPlanning Association (FPA) has threatened to take its case directly to the Federal Government if it fails to broker a solution with the insurance industry over the rising cost of professional indemnity insurance for financial advisers.
The association is about to embark on a program of consultation with representatives of the insurance industry in an attempt to educate insurers about the impact of rising premiums on financial planners.
But FPA senior manager of public policy Con Hristodoulidis says the FPA would ask the Government to step in to address the issue if the discussions proved fruitless.
According to Hristodoulidis, financial planners are reporting cases of professional indemnity insurance premium rises of up to 300 per cent over the last year. In one case, the cost of indemnity insurance cover for a planner rose from $6,000 in 2001 to $66,000 this year, Hristodoulidis says.
Further, the number of insurance brokers and agents offering professional indemnity insurance has dropped from 37 providers last year to just six.
Hristodoulidis says the collapse of HIH, economic downturn and the events of September 11 have forced some insurance companies to reassess the cover they provide.
“There has been an obvious squeeze on the provider, but are the premium increases an appropriate reaction to the market?” he says.
Hristodoulidis says the FPA will also be corresponding with the insurance industry over recent decisions by some insurers to put exclusion clauses into their insurance contracts in relation to planners who advise on tax effective schemes.
The FPA’s consultation with the insurance industry is expected to continue for the next six to eight weeks.
