Government must review PI insurance guidelines
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.
AUTHOR
Benjamin Levy
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
