FOS blames PI for increasing unpaid compo
The Financial Ombudsman Service (FOS) has again pointed to the inadequacy of professional indemnity insurance, as unpaid compensation from its rulings approaches $15 million.
In what has been an ongoing issue for FOS, the authority's quarterly update showed unpaid settlements accounted for almost a third (30.3 per cent) of its determinations in the investment, life insurance and superannuation sectors.
The unpaid compensation figure increased four per cent quarter-on-quarter, which it largely attributed to the liquidation of a single financial advisory firm, which owes six people a collective sum of $1.8 million.
The service has been heavily criticised by stakeholders in financial services for its inability to enforce its rulings.
FOS reiterated "PI Insurance is just not effective" as a means of ensuring compensation.
"Given that the problem of uncompensated loss continues to arise for consumers, FOS remains an advocate of some form of limited compensation scheme of last resort, which can be implemented at relatively low cost, as the most effective way to deal with the issue of consumer losses," it said in a statement.
FOS said 26 financial services providers have been "unable or unwilling" to comply with 120 rulings since January 2010.
The value of the money owed to consumers was at $12,686,956.69, but adjusting for inflation would be closer to $15 million, FOS said.
Most of the unpaid disputes continue to relate to financial advisory firms.
Recommended for you
Rising bearishness among investors has led to a retreat into defensive assets, according to the latest quarterly manager and intelligence trends report from Bfinance.
Cbus Super, the superannuation fund for blue-collar workers, has announced it paid out almost $300m in insurance claims over the last financial year, a rise of $40m from the year before.
The $700 million not-for-profit fund Lutheran Super has announced it is to merge into Mercer Super, with the transfer set to take place in the fourth quarter this year.
Superannuation assets fell 0.5% in value over the 12 months to the end of June, according to the latest quarterly figures from the Australian Prudential Regulation Authority (APRA).
