AFA deal hoses down PI heat
The Associationof Financial Advisers (AFA) has negotiated a deal to find insurance cover for its members through the London-based Lloyds group in order to bypass the worsening crisis over professional indemnity insurance for financial planners in Australia.
The deal, which was set up by a Sydney-based insurance broker with links to the Lloyds group, was signed off by AFA directors at a board meeting in Canberra last week.
AFA director Robin Yates has confirmed that 600 financial planners have already agreed to be part of the deal, which would see them apply for insurance cover directly with Lloyds in London to avoid much of the chaos in the local professional indemnity insurance market.
Yates says it took just two weeks to find the 600 advisers who wanted to be part of the deal, a key indication of the level of anxiety amongst financial planners over the drastically rising premiums being quoted by insurance groups in Australia.
“In my own case, my PI premiums have increased from $486.74 in June 2000 to $13,567.16 in June 2002, or a multiple of 28 times in 24 months, a figure which nobody in the world could justify. The excess has also increased from $500 to $5,000,” Yates says.
“I have been in this profession for nearly 25 years and have never had a claim of any kind.”
Yates, who runs two financial planning offices in Tasmania under The Business Life Group banner, says financial planners involved in the deal would have to negotiate their premiums individually with Lloyds.
However, he says the AFA was expecting the premiums paid by advisers involved in the deal to be vastly below what they would have expected to pay if they sought cover through the limited number of insurance groups still offering professional indemnity cover to financial planners in Australia.
Of the 37 insurance groups who were willing to offer cover to financial planners in Australia last year, only four — QBE, Dexta, AIG and Macquarie Underwriters — remain, resulting in vastly escalating premiums for advisers whose cover is currently up for renewal.
Yates says financial planners in Australia would be forced to look increasingly offshore to access reasonably priced professional indemnity cover.
“There will be an enormous backlash from advisers in Australia and many will get to the stage where they will have to go offshore [to get insurance],” Yates says.
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