In addition to the cost of professional indemnity (PI) insurance for financial planners rising substantially, the measures being used to assess businesses seeking insurance have also become more stringent.
Vero, which is part of the Suncorp group, is one provider reviewing its exposure to the financial planning industry, with the company confirming it was tightening its procedures for providing cover for financial planners.
“We’re certainly tightening our controls and we are increasing prices and looking at other ways to recognise good performance,” said Alex Green, Suncorp commercial insurance executive manager, professional and financial risks.
“In an environment where there’s more claims, there’s certainly scope to clarify which [businesses] you do and don’t want to cover.”
Tighter controls are being imposed based on the ongoing advisory activities of the planner, as well as their advice history. This may include the “aggressiveness of investment strategies they’ve had in the past”, Green said.
Green said businesses seen to present a higher risk would be likely to attract a premium loading, adding it may “even be a greater loading than we offered in the past”.
CGU is also tightening the reins, stating there were “very limited risks that we would like to underwrite in this segment”. A spokesperson for CGU, which no longer accepts new business from financial planners, said while the insurer had not changed its view on the risk associated with certain investment products, the recent changes in the environment in which financial planners operate has to be considered in underwriting the risk.
Allianz has also stopped seeking new business from financial planning practices over the past year. A spokesperson for Allianz said while the insurer did not have a large number of clients in the financial planning sector, it did provide cover to a number of large dealer groups in the hope that these companies would have higher standards of compliance and risk management.
“But I think as history has demonstrated, that has not been the case, there have been a number of large failures of large firms,” the Allianz spokesperson said.
