The Association of Financial Advisers (AFA) has called on the Government to review the Australian Securities and Investments Commission’s RG 126 requirements for professional indemnity (PI) insurance in its submission to the Rippoll inquiry.
The failure of a number of high profile companies in the industry was testing the RG 126 guidelines to make PI insurance more available “to the limit”. It was questionable whether the five remaining PI insurers would continue to provide insurance to financial planners, the submission said.
Fidelity requirements, increases in compensation limits, and the financial crisis have meant that financial planning groups have been unable to purchase the insurance cover they need due the PI insurer’s discomfort with the level of exposure.
A further reduction in the number of insurers in the market would lead to further restrictions on the terms and conditions of insurance policies and would force up the cost of already expensive premiums, the submission said.
Insurers expect more than $300 million worth of claims in the next two to three years.
