PI alert: Westpoint threatens premium party
Premiums for professional indemnity (PI) insurance for financial planners have plummeted in the last 12 months, but a major insurance company has warned the Westpoint situation could push them back up again.
“The premiums for financial planners reduced by around 20 per cent in late 2005 and early 2006,” said QBE Australia chief operating officer Terry Ibbotson, who added that QBE had “a significant market share” of the financial planning PI market.
“But with the Westpoint event, should it eventuate in real claims, then that will obviously impact the price of PI insurance for financial planners going forward.”
Law suits are currently being prepared against up to 100 financial planners on behalf of 2000 investors by law firm Slater and Gordon over money lost through several developments associated with Westpoint.
Dexta Corporation national manager, professional and financial risks, Graeme King said it was difficult to tell what impact the collapse of Westpoint would have on PI premiums.
“It’s very early days. We don’t know what the fallout is going to be for financial planners and obviously the PI insurers. We just don’t know … I think it’s going to be a wait and see [situation] over the next couple of months with what happens with these class actions, assuming they do actually proceed.”
King said PI premiums for financial planners had fallen by around 15 per cent in 2005 for the second year in a row — a dive few would have predicted.
“I don’t think anyone foresaw what was going to happen in the last 12 months with the rates coming off so quickly,” he said.
Westpoint aside, King predicts premiums will fall even further until about June this year before reaching a plateau in the new financial year.
“That’s the feedback we’re getting from reinsurers in particular. So I think the fall over the last two years, as part of the big PI picture, will stop.”
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