The Financial Planning Association (FPA) has voiced its concerns again over the state of the professional indemnity (PI) insurance market in Australia, after it emerged that AIG will cease offering the product to financial planners later this year.

FPA CEO Sarah Abood says the peak body is also “exploring” a number of options to ensure its members continue to have access to affordable and effective PI insurance into the future.

As insuranceNEWS.com.au has reported, AIG will cease offering PI insurance to financial planners in Australia some time in the third quarter. AIG declined to comment but insuranceNEWS.com.au understands the US-based insurer has decided to stop accepting renewals in the September quarter.

“The FPA has been concerned about the affordability and effectiveness of the current professional indemnity insurance offerings for some time,” Ms Abood told insuranceNEWS.com.au.

“We have long been calling for a thorough review of the coverage and accessibility of professional indemnity insurance for financial planners and for enhanced compliance monitoring by the [corporate] regulator.”

Ms Abood says the FPA has engaged in a Treasury-led process on ways to enhance the effectiveness of PI insurance, highlighting the peak body’s concerns surrounding the PI market, premium costs and availability for planners.

The Treasury process stemmed from an announcement in October last year from Treasurer Josh Frydenberg and Financial Services Minister Jane Hume as legislation for the Compensation Scheme of Last Resort was introduced into Parliament.

“As this evaluation by Treasury progresses, we hope to see a discussion paper released by the Government after the caretaker period has concluded and we look forward to participating further in this process in support of our members,” Ms Abood said.

Association of Financial Advisers (AFA) CEO Phil Anderson says the looming withdrawal of PI products for financial advisers and planners by a key insurer is “never a good sign”.

“The AFA is aware that AIG intends to exit the Australian financial advice PI market, and this does concern us,” Mr Anderson told insuranceNEWS.com.au. “In a hard market, with capacity limitations and rising premiums, it is never a good sign to see one of the key participants leave.”

“PI insurance is mandatory for advice licensees, so this is something that we take very seriously and will be watching closely.”