FSCL surprised by PI insurance hikes
FSCL chief executive Susan Taylor has expressed her surprise at soaring professional indemnity insurance costs under the FSLAA regime.
Wednesday, June 9th 2021, 9:17AM 
4 Comments
Advisers at NZFSG were recently informed that PI insurance would rise to between $2,500-$2,600 for the next year, while those with their own FAP licence would face costs of at least $4,100.
Traditionally, PI insurance premiums have been closer to $1,500 per adviser each year.
Insurance experts say a hardening market, and the expectation of stronger enforcement under FSLAA, is the main reason for the hikes, but advisers say the increases are unfair.
Taylor, the chief executive of dispute resolution service FSCL, said insurance increases were "very large, especially for the smaller advisers".
She said she had not seen any correlation between the new regime and the level of complaints received by FSCL.
Taylor added that claims tended to concern service issues and small monetary values.
"We only investigated 48 disputes in the year to June, across risk, financial advice and mortgage advisers. When you consider the size of the industry, that's a low number."
Taylor said underwriters had not been in touch with FSCL to discuss the level of risk or the potential increase in claims, nor had they asked for data.
"At the very least, I would have expected that the insurers might want to obtain more data before increasing premiums. We would be keen to have a chat with them if they want to speak."
Advisers including iLender's Jeff Royle have called on industry leaders to discuss rising insurance costs with underwriters.
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Comments from our readers
In answer to JeffQV's comment after years as an adviser to Financial Advisers and an underwriter for insurers in this space a claim which I have seen from Mortgage advisers is a claim against the adviser for their recommendations of using a 2nd tier lender on the basis that a mortgage was not achievable with a 1st tier lender, subsequently the client walked into a trading bank the adviser did not deal with and was offered a mortgage. In these cases the claim against the adviser results in a claim for the increased interest costs, any fee the adviser may have charged for arranging the 2nd tier finance, and break costs when the client refinances.
Other claims are purely for circumstances where the client alleges the break fees were not clearly advised and the client is left with charges they are unhappy with....
As a specialist Fire & General adviser in this space, I'm more than happy to discuss and give advice for Advisers around their PI options this year. Clinton Stanger curatedrisk.nz
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