PAA, LBA dismiss PI concerns

Members of New Zealand's two main insurance-based advisory associations have not experienced any difficulties with their professional indemnity (PI) cover, Good Returns was told yesterday, in contrast to problems reported by the Institute of Financial Advisers (IFA) last week.

Thursday, May 7th 2009, 7:16AM

by David Chaplin

Both Dave McMillian, head of the Professional Advisers Association (PAA), and Kevin O'Gorman, president of the Life Brokers Association (LBA), said their respective PI schemes appeared to be functioning well with no upsurge in claims or rejections from insurers.

Last Friday the IFA slammed Lumley, the dominant PI player in the New Zealand financial advisory market, for applying "twisted logic" in rejecting a burgeoining number of claims from its members.

"We don't share their concerns," McMillan said. "I've just been on a PAA roadshow and the only time PI has been mentioned was when I brought it up."

O'Gorman said while the LBA is dealing with "one or two" cases at the moment the group, which has around 140 members, was "not experiencing any issue" with PI cover.

"But [PI] is on the table for the board to look at it at the next meeting," he said.

Lumley provides PI cover to all three associations, however, the underlying schemes differ in terms and policy wording.

According to McMillan, it would be "dangerous to generalise" about PI cover given the different nature of the various association schemes.

He said the PAA scheme provides cover of up to $1 million for investment advisers to defend accusations with an option to extend the cover further.

"But most of our members don't have exposure to the investment risk," McMillan said.

However, Vidler said the problems identified by the IFA were not limited to a single association scheme. He said the IFA PI scheme itself was relatively small with only 100 members signed up to it and only a couple of recent claims reported.

Vidler said early results from an IFA member survey, which had already generated about 400 responses, were "very interesting... it confirms our views [on the PI issue]".

Tags: LBA PAA PI professional indemnity