The market for professional indemnity (PI) insurance in Australia for financial advisers is stable and generally available, but gaps exist between what ob体育 expects and some of the insurance products available, an ob体育 report into the market for the eight months to June 2015 has found.
All Australian financial services (AFS) licensees must have arrangements to compensate clients and generally this means holding adequate PI insurance. ob体育's minimum requirements for PI insurance are set out in Regulatory Guide 126 Compensation and insurance arrangements for AFS licensees (RG 126).
While the market was basically sound, the ob体育 review found some PI insurance policies do not meet the requirements in RG 126.
The review was carried out in response to AFS licensee concerns about securing PI insurance and the high level of unpaid external dispute resolution scheme determinations.
鈥楢dvice businesses must have adequate PI insurance, and they should make sure this cover measures up with our requirements in RG 126. ob体育 will follow up with surveillance of advice licensees' PI insurance and if we find problems we will take enforcement action,鈥� said ob体育 Deputy Chairman Peter Kell
Background
The ob体育 review was carried out between November 2014 and June 2015 and sought to understand the availability and cost of PI insurance. This included:
- testing the concerns we have heard from some advice licensees over the past few years that they have been unable to secure PI insurance at a reasonable cost, and
- determining whether the insurance available conforms with ob体育鈥檚 guidance about what we consider to be adequate PI insurance 鈥� in particular, whether there are any significant deficiencies in the PI insurance that is generally available to advice licensees.