A surge in professional indemnity (PI) claims arising from the financial crisis has prompted Suncorp-owned insurer Vero/APUA to develop an additional PI policy for financial planners and investment advisers.
"Before the global financial crisis, Vero/APUA received around five claim notifications from the financial services industry per month - this jumped to around 60 notifications at the peak of the crisis and has remained at high levels," Vero head of casualty Alex Green said.
"Our current policy provides broader cover, which may not be required by all of our policyholders - so we will now offer a choice of two policy wordings."
Green said Vero would continue to offer its traditional Financial Planners Extended Professional Indemnity Insurance Policy, but would now also offer new wording in the Financial Planners Standard Professional Indemnity Insurance Policy, which was closer in coverage to other wordings in the market.
"The new policy is tailored to suit smaller firms or those that need to balance the cost of their professional indemnity cover with the other expenses of running a modern financial planning or investment advisory firm," he said.
"In most cases there will be a difference in price between the two different policies. Financial advisers will be able to receive a quote on both policies and select the price and terms that are best suited to their business.
"The new policy is designed to provide financial advisers with greater choice around the cost and coverage of their professional indemnity policies."
Alexis Insurance Brokers principal Christina Kalantzis said the new wording might be suited to sole practitioners, practices using traditional investments and those with very strong relationships with clients.
"It is important for financial planners to note that the new policy costs less because it does not cover things like margin lending and breach of authority," Kalantzis said.
"When you review the policy you have to be sure it covers the way you do business, complies with RG 129 and section 9.12A of the Corporations Act."
Apex Insurance Brokers account director Abraham Tavares said that from a financial planning industry perspective it was the first time an underwriter had offered two types of cover.
"What Vero has done is come out with two wordings. One is for clients who want the standard policy without the bells and whistles, so the standard cover would generally meet the RG 126 requirements, and then obviously the enhanced cover has got all the bells and whistles," Tavares said.
"Other financial planners who are very hands on with their business may be interested in purchasing the limited cover to minimise paying a higher premium as all of them know that over the last 24 months the premiums have gone up dramatically."
He said it was likely other insurers would follow Vero's lead, otherwise Vero could pick up a majority of the market that wanted limited cover.
