Redraft of law best hope for fair PI: FPA
TheFinancial Planning Association(FPA) is lobbying for changes to the Insurance Contracts Act to reduce the professional indemnity insurance problems currently plaguing planners.
The FPA has recommended to the Insurance Contracts Act Review specific changes to the Act which it says will result in more consistent and affordable professional indemnity coverage as well as “a more equitable balance between the rights of all parties involved”.
The FPA says section 54 of the Insurance Contracts Act has to be redrafted to see consistent and affordable coverage made available to all professionals, as the current interpretation is causing unintended problems.
According to the FPA, one of the unintended outcomes of section 54 of the Act is that of assessing risk, resulting in insurers that may no longer be prepared to provide cover.
The FPA also says that recent judicial interpretations of section 54 of the Act are a further disincentive for insurers to enter the already decreasing market, in light of the significant uncertainty section 54 creates for them.
The FPA also points the finger at recent interpretations of section 54 for the significant increases in premiums FPA members have experienced.
“The FPA recommends that section 54 be redrafted to ensure that it may not be interpreted in the current manner,” Smith says.
FPA acting chief executive June Smith says many FPA members are experiencing problems in securing adequate professional indemnity insurance, with some insurers refusing to provide any coverage while others showing exponential premium increases and growing lists of product exclusions.
“The losers have been the insured who have been unable to cover and consumers who may not be able to seek proper redress in the event that negligent services have been provided.”
“These experiences have emphasised the urgent need for reforms that will facilitate a more effective market for insurance products in Australia,” Smith says.
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