FPA says ACCC PI report falls short
TheFinancial Planning Association(FPA) has criticised the Australian Competition and Consumer Commission’s (ACCC) Public Liability and Professional Indemnity Insurance Monitoring Report, released yesterday, for not sufficiently addressing the professional indemnity (PI) insurance crisis facing financial planners.
The ACCC’s report found that professional indemnity premiums rose by an average of 31 per cent in 2001 and 36 per cent in 2002.
FPA chief executive Ken Breakspear says, “All FPA members have experienced steep rises in PI insurance, with more than half having trouble securing cover and some receiving quotes 1000 percent higher than the previous year’s premiums.”
However Breakspear says the report does not mention other factors impacting on financial planners, such as exclusions and excesses with FPA members exposed to increased levels of commercial risk due to increases in policy exclusion clauses with many specialised financial planning areas, such as margin lending products and direct share advice, now not covered.
The ACCC also asked insurers about the impact of law reform on premiums for 2003, but as most of the reform has focused on personal injury rather than economic loss, PI insurance claim costs were likely to remain the same and there would be no constraint on premiums under the reforms.
The report, which is the first of four to be delivered over the next two years, was released as theAustralian Prudential Regulation Authorityannounced that they would begin consultation with the insurance industry and associated bodies on the collection of policy and claims data for public liability and professional indemnity insurance.
Initiated at the request of the Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, the project aims to collect comprehensive data on claims costs, to determine appropriate premiums and develop suitable insurance products for these sectors.
APRA has requested recommendations and comment from the industry for the first round of the consultation period, which closes on 22 August 2003, and during the second phase, will seek industry comment on draft data collection and reporting proposals based on the input received in the first round.
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