Professional indemnity (PI) costs for some financial planners could plummet by as much as 25 per cent after the QBE Insurance Group announced significant cuts to its rates for advisers last week.
However, QBE says the reduction will apply only to financial planners who have good risk management procedures in place.
“The fee reduction will depend on a rating process, so it will be very much determined by the risk assessment by the planner,” QBE professional liability general manager Peter Lemming says.
The rate reduction, which took effect late last week, will apply to PI insurance covering what QBE considers to be planning procedures “at the low risk end” of the advice process.
QBE national underwriting manager for professional liability Adrian Gamble says the cuts will “mainly be at what we call the low risk advice end, which is your risk business and that type of thing”.
Lemming confirmed that the reduction will predominantly be enjoyed by advisers offering risk advice. But he says there may be a marginal rate reduction for planners offering investment management advice.
“If [planners] have good risk management procedures in relation to their investment management and a really good track record of sticking to certified products on their approved product lists and have procedures in place that make sure that’s double checked, then there may be a marginal reduction for investment management as well,” he says.
The reductions will probably average around 15 per cent but could be as high as 25 per cent in some circumstances.
Gamble says the rates were lowered because QBE had “got its loss ratios under control”. He did not predict further rate decreases for advisers in the near future.
Lemming stopped short of saying the reduction was an indication of a wider trend in the PI market for planners, but acknowledged it is a sign of good performance by the financial planning sector.
