PI scheme pays off
The Financial Planning Association’s (FPA) new professional indemnity (PI) insurance facility has proved its worth, demonstrating that it could save members 15 per cent on premiums, halve their excess and extend cover to activities like direct share investment.
This was the experience of Hewison & Associates, the four-planner practice headed by John Hewison, the chair of the FPA taskforce which negotiated the facility with the American Home Assurance Company (AHAC).
Hewison said his practice’s annual premium reduced from 1 per cent of revenue to 0.85 per cent after switching to the new facility, and the excess on a claim came down from $20,000 to $10,000.
The facility, established by the FPA last month, also covers more activities, because Hewison said AHAC understood financial planning better than competing PI insurers.
“There’s a big difference, they actually know that gearing, tax-efficient schemes and direct share investments are legitimate financial planning strategies. They’re more interested in the way those strategies are being used, rather than questioning their right to be there in the first place,” Hewison said.
Hewison said AHAC had previously focused on high-net-worth advisers, but this facility would make their cover affordable for “typical” practices.
He said projected scale had helped reduce AHAC’s quote, as had its exclusivity to FPA members, “whom it regards as lower risk”.
A three-year agreement has been entered with AHAC, a member company of American International Group, to develop the facility for FPA members.
The FPA will not recommend or endorse the insurance, but AHAC has strengthened its relationship with the association by sponsoring its National Quality Assessment Program to the tune of $60,000 for this year. That sponsorship may extend to subsequent years but will depend upon the success of the entire arrangement.
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