Insurance fears for planners

FPA concerned about cost hikes

By Madeleine Collins
Wed 25 Jul 2007

Professional indemnity insurance premiums could be on the rise.

The FPA fears Federal Government plans to double the size of professional indemnity (PI) insurance will force premiums up.

ASIC wants financial planners to take out at least $2 million in PI from next year, which is twice the cover that the association requires its members to have.

FPA chief executive Jo-Anne Bloch said the association is "very comfortable with our PI policy" and has not been under any pressure from members to increase the cover.

"We are very concerned that the costs don't go up," Bloch said.

"We're very concerned that we don't get an increase in premiums. We need to be aware of our members, especially our smaller licensees."

PI will become compulsory for financial services licensees from 2008 following the Westpoint collapse, which left planners exposed and consumers unprotected.

Prudentially regulated institutions such as banks will be exempt.

The FPA has written to the Financial Industry Complaints Service (FICS) to protest against raising the amount it charges for licensees to compensate investors.

FICS wants to raise the monetary limit from $100,000 to a suggested amount of $280,000.

But the FPA believes this could hurt small businesses already facing the impact from compulsory insurance.

"If monetary limits also increase, FPA members are naturally concerned that a further increase in annual premiums will inevitably occur," Bloch wrote in a letter to FICS legal counsel Mike D'Argaville.

QBE stopped offering new PI policies to planners recently after the collapse of Westpoint, Fincorp and Australian Capital Reserve.

Bloch said QBE's move will inevitably cause a knock-on effect.

"This may lead to further withdrawals by other providers or carve-outs and policy exclusions," she said.

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