By Ross Kelly
PROFESSIONAL indemnity (PI) insurance premiums for financial planners dropped by around 12.5 per cent in 2004 and are set to remain reasonably stable despite the impending introduction of choice of fund in July, according to new figures.
A report card on public liability and professional indemnity insurance by the Australian Competition and Consumer Commission (ACCC) has revealed that PI premiums fell an average of 15 per cent across all industries in the first half of 2004.
While the ACCC report did not specifically examine the financial planning industry, professional indemnity insurer Dexta confirmed that premiums for advisers fell significantly.
“I would think that during the last 12 months, financial planners’ rates came down in round figures of about 12.5 per cent, which is pretty significant when you compare it to 2003 when rates were going through the roof,” Dexta professional and financial risk division manager Graham King said.
According to King, premiums are likely to stay the same during 2005.
“It’s a difficult call because there’s so many factors influencing premium rates across the whole industry and within individual dealerships. However, my gut feeling is that I would see the rates stabilising in 2005,” he said.
King pinned the reduction on dealer groups’ increasing capacity to submit detailed historical claims data more so than on the introduction of Financial Services Reform (FSR).
But Financial Planning Association (FPA) chief executive Kerrie Kelly, who is still trying to negotiate an industry wide indemnity scheme for advisers, said FSR has increased insurance companies’ confidence in the financial planning industry.
“I think [lower premiums are] an example of the fact that those who have their money in the business of the financial planning sector have taken their legislative requirements very seriously and it shows that insurers have greater comfort in the way the businesses are being conducted,” Kelly said.
