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24 April 2017
A review of professional indemnity (PI) insurance for advisers has found gaps in the cover offered.
The Australian Securities and Investments Commission (ASIC) examined how current policies stack up against Regulatory Guide 126, which sets out what cover an adviser should have.
It found a number of areas where policies do not meet the requirements.
The first area of concern is cover for defence costs. At the lower end of the coverage range – $2 million – ASIC found only 14% of 591 licensees reviewed had this.
“In addition to failing to meet our requirements, this creates the risk that the indemnity offered by a PI insurance policy will be used to cover defence costs rather than being available to claimants,” the regulator’s report says.
Another gap is in reinstatements. Regulatory Guide 126 requires at least one automatic reinstatement before a policy expires – but this is not necessary when a policy’s indemnity limit is at least twice the minimum cover required.
While most PI insurers include automatic reinstatement, ASIC found one that did not, covering 185 licensees.
With regards to fraud and dishonest conduct cover, only two of the four main PI insurers offered this, despite the Regulatory Guide 126 requirement.
ASIC is also concerned aggregation of claims into one event could exceed PI policy payouts. The regulator expects a licensee to have adequate resources to cover any gaps in such claims.
“In our view, advice licensees whose policies include an aggregation clause sub-limit, and who do not cover the potential gap by holding sufficient other financial resources, are unlikely to have adequate PI insurance,” the report says.
“While the PI insurance policies we reviewed generally allow the insurers to aggregate related claims, insurers have discretion in deciding whether to do so.”
ASIC says three of the major PI insurers had standard terms for aggregation of claims, covering 491 of the 591 licensees.
On compliance with minimum amounts of PI cover, the regulator found only three licensees fell short of the $2 million threshold.
ASIC Deputy Chairman Peter Kell says the review comes in response to licensees’ concerns about obtaining cover from a limited number of insurers.
“Advice businesses must have adequate PI insurance, and they should make sure this cover measures up with our requirements in Regulatory Guide 126,” he said.
“ASIC will follow up with surveillance of advice licensees’ PI insurance, and if we find problems we will take enforcement action.”
18 April 2017
The successful applicant will be responsible for all ANZ Claims (ie direct) related strategic procurement for bodily injury (ie providers of services relating to health, recovery and injury management) and investigations (ie providers of investigative services).
11 April 2017
Westlawn Insurance Brokers is an established and respected local company with nine branches across Northern NSW. We are looking for an Insurance professional with drive and commitment to join our Lismore team.
11 April 2017
With responsibility for Professional Liability across both Australia and New Zealand, this role will require delivery on product strategy, profitability, growth and efficiency.