The Financial Planning Association (FPA), in conjunction with a range of industry players, has formed a task force and a small working group to try and resolve the problem of the rising cost of professional indemnity insurance.
Over 10 FPA and insurance industry representatives formed the task force last week in an effort to liase with the insurance industry to raise its awareness of the issues facing financial planners.
The small working group, to be made up of 4-5 members, will work to find a more long-term solution to the problem, with members of this group to be managers responsible for writing professional indemnity insurance for planners.
As reported recently inMoney Management, planners have reported cases to the FPA where their professional indemnity insurance premiums have risen by up to 300 per cent over the past year.
The FPA currently has 440 principal members that are small businesses with under 10 proper authority holders, which are being significantly affected by the premium increases.
According to the FPA’s head of professional standards June Smith, the task force has already had some success in negotiating lower premiums with insurers.
The task force has achieved this by working to provide insurers with a better understanding of the perceived risk of financial planners.
Smith says the key to solving the insurance crisis is working out how it will all fit into adequate compensation under the Financial Sector Reform Act (FSRA).
Smith says it will not be until June or July next year that joint projects between planners and insurance brokers will start to emerge.