The Financial Industry Complaints Service (FICS) could force insurers to hand money out to much higher number of consumers under a proposal to scrap the $100,000 threshhold for investors seeking compensation for financial loss.
FICS is considering an option to accept a complaint no matter what the limit is, FICS chief executive Alison Maynard told InvestorDaily.
“We’re looking at a proposal to allow us to take in a large number of complaints,” Maynard said. “I think there is a huge unmet demand.”
The proposal would help consumers who cannot resolve disputes through FICS because the amount of money they invested was above the $100,000 cap.
The proposal is not retrospective and the FICS determination panel would still have the power to decide on the amount of money that is given to the consumer. That amount would not be higher than the FICS monetary limit, which is currently $100,000.
FICS wants to raise this limit but is facing considerable opposition.
Maynard admitted the proposal was likely to cause concern to industry stakeholders.
“It’s quite scary to professional indemnity insurers and license holders to see that FICS can deal with any complaint whatsoever,” Maynard said.
“We’ve spent a lot of resources working out what [complaints] are worth and having a lot of arguments about what is or is not a complaint,” Maynard said.
“We’re speaking to industry associations and ASIC and we’ll try and end up with a monetary limit that is workable.”
In 2005 a total of 38 applications for compensation through the external disputes resolution scheme were rejected because they were above the monetary limit. Ten of these involved financial planners.
When Westpoint collapsed at the end of that year, the numbers swelled in 2006 to 81 rejected applications, 40 of which involved planners.
