PI insurance group set to reject FPA approach
Aninsurancegroup that has agreed to establish a facility to provide professional indemnity insurance for members of the Association of Financial Advisers (AFA) will turn down the opportunity to set up a similar arrangement for the Financial Planning Association (FPA).
As reported byMoney Managementin July, the AFA has negotiated an arrangement through a Sydney-based broker for an as yet unnamed insurance underwriter to provide professional indemnity (PI) cover to a syndicate of AFA members, although each individual AFA adviser will still have to negotiate their insurance conditions separately with the underwriter.
The broker, Brian King of the Crown Insurance Group, who has links to the Lloyds insurance group, confirmed last week he had been approached by the FPA to explore the possibility of setting up a similar arrangement for its members.
But King says the insurer will be forced to turn down the FPA because it will be unable to cope with the sheer size of the association’s membership.
“The fact of the matter is that the FPA have 14,000 members versus the AFA, which has about 1,000, and the underwriters aren’t prepared to take on a deluge of 14,000 in one hit,” he says.
“At this point, and I don’t know if the underwriter has officially communicated this as yet, the position that the underwriter has adopted is it cannot cope with that, so we are not interested [in setting up the arrangement with the FPA] at this point.”
The chief executive of the FPA, Ken Breakspear, says the association’s discussions with King, which were prompted by news of the AFA’s arrangement, had only been at a very preliminary stage.
“We will explore any option that might bring benefits to our members. This was just one avenue. There may be other avenues that might appear. If the AFA have got a deal, good on them, but at this point we are nowhere near that. Most of our members have already got their [professional indemnity] cover. This is about the future and the types of things we might be able to do,” he says.
King says Crown insurance is prepared to seek PI cover for individual FPA members, both with the insurer involved in the deal with the AFA and others.
“Financial planners who would come to us, we could look at one at a time and we would have to take them to the underwriter one at a time. We just can’t handle a deluge of 14,000,” he says.
The insurer involved with the AFA deal is understood to be a large foreign owned group with a presence in the Australian market.
King says the insurer has chosen to remain anonymous so that it is not “hounded” by financial planners looking to renew their professional indemnity cover.
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