Mixed industry response to changes to dispute resolution schemes

The Financial Planning Association (FPA) has criticised the Australian Securities and Investments Commission’s (ASIC) decision to introduce changes to the dispute resolution scheme system to improve consumer access, saying that consumers will bear the increased cost of more claims being lodged.

“We now want to know who will pay for all of these changes, which will result in increased costs? Is the Government increasing funding to the EDR (external dispute resolution) schemes for the significant increase in work, or are members going to have to pay higher levies?” FPA chief executive Jo-Anne Bloch said.

The changes to the EDR schemes will require them to consider claims of up to $500,000 and increase the minimum compensation payable for investment complaints from $150,000 to $280,000.

Professional indemnity (PI) insurance premiums will likely rise as a result of the changes, adding extra pressure to Australian Financial Services Licence holders. Block said the FPA is concerned that these changes will impact on the ability to meet compensation claims through PI insurance.

However, the National Insurance Broker’s Association (NIBA) has welcomed the changes limiting the maximum amount of compensation for insurance brokers to $150,000.

“Insurance brokers have a well defined risk profile and there is very little evidence of consumers being adversely affected by insurance broker negligence, fraud or bankruptcy,” chief executive Noel Pettersen said.

Dispute resolution statistics show that claims against insurance brokers are less than $5,000, he said.