PI cover premiums to soar in Storm's wake
Count Financial chairman Barry Lambert has blamed the soaring professional indemnity (PI) insurance premiums that will inevitably follow the collapse of Storm Financial on the Australian financial service's licensing system.
Lambert called on the Australian Securities and Investment Commission (ASIC) to reassess its regulation of the licensing system to prevent advice firms such as Storm from being granted a licence.
He said PI insurance is “going to go through the roof” because of claims from investors of Storm and lots of other (failed) advice firms and the rest of industry is going to be required to subsidise these firms.
Addressing a Financial Planning Association function in Sydney on Friday, he said if Storm had “not been granted an AFSL licence on the basis of its (high leverage) model, we would not be having this problem”.
The problem for Count is that Australian Financial Services Licences are being “given out willy-nilly and then we are discovering all these problems and the whole industry is being blamed for it".
“Rather than the regulator fixing the problem at the source, by not granting licences, all it is saying is that the rest of industry must cross-subsidize the PI out there.
“The goodies in the industry must pay for the baddies, and that is just blatantly unfair,” he said.
Lambert said the “solution is for ASIC to assess the quality of the licensees out there, rather than have all of these rules about how we compensate people in the event of a failure".
He added that unless ASIC guarantees that the insurers are going to pay every claim, there will still be problems (with PI cover) because some of these insurers are still going to say their policy doesn’t cover something.
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