Pearce calls for caution over FICS monetary limits
Chris Pearce
The Parliamentary Secretary to the Treasurer, Chris Pearce, has advised the Financial Industry Complaints Service (FICS) to be mindful of the flow-on effects that may occur if the body reviews the monetary limits it applies to investor claims.
In particular, Pearce warned FICS to consider the implications a change in the limits could have on the way professional indemnity insurance operates for the financial services industry.
Speaking at the FICS annual conference, Pearce said: “I would emphasise that the process of determining jurisdictional limits should canvass all possible issues associated with the change. On this point, I would note the possible implications for any decision concerning limits created by caps on indemnity insurance imposed by the market and restrictions on professional liability.
“Raising the compensation cap too high would have the flow-on effect of raising premiums. This move could also result in some insurers not covering EDR (external dispute resolution) determinations over the current limits,” he added.
The review of the jurisdictional limits applying to FICS has currently been deferred.
Pearce’s call comes at a time when the complaints body has been under fire regarding the application of its monetary limits in relation to complaints surrounding the collapse of the Westpoint group of companies.
In these circumstances, FICS had been separating claims to allow them to fit within the monetary boundaries.
The limits currently stand at $100,000 for investment complaints and $250,000 for complaints regarding life insurance.
In his speech, Pearce also called for a streamlining of the various EDR systems currently in place.
To this end, he praised the Financial Ombudsmen Service, a joint call centre shared by FICS, the Insurance Ombudsman Service, the Banking and Financial Services Ombudsman, and the Credit Union Dispute Resolution Centre.
“I would like to take this opportunity to appeal to the chairs and representatives of the boards — both consumer and industry — to continue to give this matter serious consideration. I would urge them to work together to ensure the maximum benefit for all stakeholders — and most importantly, for the many purchasers of financial products who are entitled to maximum protection and ‘a fair go’,” Pearce said.
AUTHOR
Recommended for you
Wealth Data has examined which advice business model has seen the most growth since the start of the year including those that offer holistic advice.
Research conducted by Elixir Consulting and Lonsec has quantified the efficiency gains of using managed accounts in financial advice practices in hours per week saved.
WIth only one-quarter of advice practices actively seeking feedback from clients, the Financial Advice Association Australia has emphasised why this is a critical tool for client retention.
As the government announces a public inquiry into the collapse of Dixon Advisory, risk adviser Richard Silberman has detailed the three areas that typically lead to an AFSL's collapse.
