Obtaining PI not a big problem claims ASIC
Obtaining professional indemnity (PI) insurance is difficult for financial planning firms but the Australian Securities and Investments Commission (ASIC) has provided data to a Parliamentary Committee suggesting that it is not a significant or insurmountable hurdle for licensees.
The regulator has claimed that last financial year only two out of almost 600 Australian financial services (AFS) licence applicants withdrew citing an inability to obtain PI insurance and that those two applicants were, in any case, not advice licence applicants.
Furthermore, it said that in the first quarter of the current financial year no applicants have withdrawn citing an inability to obtain PI cover and that a “small number who claimed they were unable to obtain cover were subsequently able to”.
“In the 15 months to 30 September, 2020, 31 of 2,000 (2%) breach reports from AFS licensees related to difficulties in obtaining PI insurance,” it said.
“ASIC does not have the ability to influence the price or availability of PI insurance,” the regulator said. “We can attempt to assist licensees facing difficulties with obtaining PI insurance by considering submissions from licensees for alternative compensation arrangements as contemplated under the regulations.”
“ASIC has not received an application seeking approval of alternative compensation arrangements from an advice licensee or licence applicant. ASIC received one application from an advice licensee seeking a no-action position while they attempted to obtain PI insurance,” it said. “The applicant subsequently confirmed with ASIC that they intended to operate as a corporate authorised representative under another licensee and lodged an application with ASIC to suspend their AFS licence.”
Queensland Liberal back-bencher, Bert Van Mannen had asked ASIC whether it was concerned about the state of the PI market and what it intended to so if the situation deteriorated.
Recommended for you
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
The Senate economics legislation committee has recommended Schedule 1 of the Delivering Better Financial Outcomes legislation be passed as it is a “faithful implementation” of the recommendations.
Treasurer Jim Chalmers has handed down his third budget, outlining the government’s macroeconomic forecasts and changes to superannuation.
