The crisisin professional indemnity insurance, which has engulfed many professions in recent weeks, has hit home for financial planners, with at least two more groups refusing to renew the cover for a range of advisers.
Money Managementhas confirmed that CGU Professional Risk and Resource Underwriting Pacific are the latest in what appears to be a long line of insurers refusing to cover at least some groups of financial planners over the next year.
The news comes as data released by the Financial Planning Association (FPA) revealed that of the 37 providers who were willing to offer professional indemnity insurance to financial advisers last year, only six remained, as the insurance industry continued to reel from rising claims and the after effects of September 11.
It is understood that CGU at least will continue to insure financial planners owned by large institutions, including those attached to the AMP Financial Planning, AXA, Apogee and Godfrey Pembroke dealer groups.
But the outlook for smaller planning groups could be far bleaker, with CGU refusing to cover independent dealers and their authorised representatives.
The situation could leave some financial planners facing the prospect of having no professional indemnity cover at all over the next year, as insurance brokers scramble to find insurers to take on the planners now rejected by groups like CGU and Resource Underwriting Pacific.
“Unfortunately, the deteriorating state of the insurance market and all claims experience of the financial planning and insurance industries specifically, has led to a decision by the current facility, co-insurers Resource Underwriting Pacific and CGU Professional Risk, to decline to offer the facility for 2002/03,” a letter from insurance brokers AON to one group of advisers says.
“No new markets have opened up to take over the facility as a whole and this means that we will seek coverage for you individually with the remaining market capacity,” the letters adds.
The crisis has forced the FPA to confront insurers face-to-face in an attempt to stop the situation escalating to the level reached in the medical profession, where the Government was forced to step in to stop doctors downing tools.
But even the FPA’s intervention has not stopped those insurers still willing to cover financial planners quoting, in some instances, vastly inflated premiums.
In one case uncovered by the FPA, the premium quoted for the professional indemnity cover of one financial planner jumped from $6,000 in 2001 to $66,000 this year.
“The reduction in the number of insurers willing to take on financial planners has had an impact on premiums because we have gone from a fairly competitive market to a sort of oligopoly,” the FPA’s senior manager of public policy Con Hristodoulidis says.
