PI cover out of reach for FPA
TheFinancial Planning Association(FPA) will find it impossible to solve its professional indemnity (PI) insurance woes, according to a leading insurance broking house and anAXAadviser association.
Crown Insurance’s Brian King, head of the broker firm engaged in preliminary negotiations on PI with the FPA in the last quarter of 2002, believes the FPA will face an uphill battle to gain PI insurance due to a market environment where underwriters perceive financial planners to be a source of risk.
King says underwriter reluctance has increased following the Australian Consumers’ Association (ACA) andAustralian Securities and Investments Commission(ASIC) survey, which he says appears to have left underwriters unwilling to walk into the “hornet's nest” of the planning industry.
Authorised Representatives Association (ARA) chairman Leo Menkins also claims the FPA will find it impossible to get PI insurance for its membership body, due to underwriter perception and misunderstanding of the industry.
Menkins says the ARA, representing the interests of 650 advisers from AXA, worked hard for two years with AXA to secure PI insurance for its advisers, involving a process of overlaying the regulation and compliance requirements of both ASIC and the AXA dealer to produce a basic proof of standard for the underwriter.
Menkins believes this approach will be the only way large groups of advisers will gain cover, and as the FPA is not directly responsible for member compliance, this will not be possible for them.
King says the current situation means financial planners will have to continue to negotiate on an individual basis with underwriters through insurance brokers.
The comments follow a recent attempt by the FPA to secure cover with Zurich London, which the FPA says collapsed because of the UK insurer’s failure to understand the Australian market.
FPA PI Insurance Taskforce chairman John Hewison says the FPA is committed to providing a PI solution for its members, and the association is looking at all its options and will “get there in the end”.
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