Insurers are taking a cautious approach to writing professional indemnity (PI) cover for financial planners, citing concerns about an increase in disputes and litigation.

Vero says it is being selective about offering PI and directors’ and officers’ insurance for planners, considering cover on a case-by-case basis.

Its rates remain in line with the rest of the industry, according to a company spokesman.

Although concerns have been raised that the Future of Financial Advice (FOFA) reforms will prompt insurers to increase rates (see other story), Vero has made no changes because of the legislation.

FOFA may become an issue on a case-by-case basis in future, the spokesman says.

AIG says rate increases for financial planners are not new, and it is also “selective” about the planners it covers.

“We’ve been pushing rates for three years for financial planners,” Commercial Manager for Financial Lines Matthew Clarke told insuranceNEWS.com.au. “Across the board other insurers are doing it as well, to different extents.”

He says this is driven by losses, including adverse development on old claims from the global financial crisis, and a large number of new claims.

“The total pool of premiums for financial planners still doesn’t cover the total pool of losses the profession generates, so premiums need to rise,” he said.

He says excesses must also rise, so planners “have more skin in the game” and implement risk management procedures.

“I wouldn’t want to be painting the picture that all financial planners are bad risk. Some are good risk. But, on the whole, it’s been a poor-performing profession from a professional indemnity point of view.”

FOFA is “a bit of an unknown for insurers”, he says. AIG is not making changes other than to ask planners about their readiness for the reforms as part of its underwriting criteria.

“We certainly monitor the frequency and severity of claims,” Mr Clarke said. “If that moves, we’ll make changes based on that.”

He says AIG is committed to covering financial planners and is looking to quote new business.