The availability and price of professional indemnity insurance for Australian planning firms has suffered throughout the past few years as a result in the number of professional liability insurance claims, industry experts say.
Decisions made by the Australian Financial Ombudsman Service have been the primary reason behind the difficulties planning firms face when trying to get business liability insurance in the country. These decisions by the FOS impact commercial insurance underwriters’ decisions directly in regards to insurance offerings, said Deen Sanders, chief professional officer of the Financial Planning Association.
Mr Sanders said that not only are costs on the rise as a result of the increased number of cases. In fact policies are seeing the average number of exclusions increase at an unwelcome pace, he added.
This can lead to planners to cease advising on the products resulting in decisions by the FOS. Less liquid products are particularly affected, despite the marketplace undergoing changes between the decision by the FOS and the time of the original complaint.
Most concerning is that risks are spread unevenly across the entire marketplace. This is due to the fact that the FOS has a tendency to hold planners at fault, placing an unfair burden on underwriters, said Mr Sanders.
Planning firms’ lack of choice is also contributed to due to the dearth of competition amongst underwriters. While the UK and US markets have anywhere from 12 to 15 different underwriters from which to choose, the Australian market has only three or four different underwriters, remarked Mr Sanders.
The chief professional officer said that it may be time for the Australian Government to take steps to find some way to either spread liability risks in a more even manner throughout the marketplace, if not increase competition somehow.