The Association of Financial Advisers (AFA) says charging consumers to lodge complaints for external resolution would deter frivolous and vexatious claims, as members find it increasingly difficult to obtain cost-effective professional indemnity (PI) cover.

“We advocate for the consideration of a small charge for submitting a complaint that could be reimbursed by the financial services provider on successful conclusion of the matter,” the association says in a submission to the Financial System Inquiry.

The AFA says the ability to obtain cost-effective PI cover depends on insurers’ views on external dispute resolution (EDR) schemes.

“Where there is increased scale of potential payouts in the EDR system and reduced predictability in the outcomes, PI insurers are much less likely to provide insurance at an acceptable pricing level.

“We have seen a significant reduction in the number of PI insurers in the Australian market and lack of competition is becoming a concern.

“Most recently, Vero has decided to exit this market.”

Problems are exacerbated by the lack of an EDR appeals process, while in recent years caps on payouts have increased significantly to $280,000, the submission says.

The AFA also calls for the role of plaintiff lawyers to be addressed. It says they often become involved when not required and take a large share of claim money that would otherwise go to consumers.

The group does not oppose the role of lawyers when claims involve complex legal matters or have been rejected by life companies. But “we do not believe that it is appropriate where a client or their beneficiary is submitting a standard claim”.