Higher excesses on professional indemnity (PI) insurance may hit advisers and dealer groups harder than premium rises, according to Seaview Consulting Director Bob Neill. 

“It is the dealer groups with three or four claims under way that are seeing the big increases,” he told insuranceNEWS.com.au.

He says advisers and dealer groups can plan for premium increases and find money to pay them, but excess payments are unpredictable.

“Most advisers and dealer groups fund premium increases through income, but if they are facing large excess payments that is going to hurt,” Mr Neill said. “I suspect it will be the mid-tier dealer groups that will suffer most from these excess increases.”

Suncorp Commercial Insurance Chief Underwriter Brad Dalton is non-committal about higher excesses being applied to advisers and dealer groups with poor claim records.

“There have been no significant changes in Vero’s underwriting practices in relation to excesses,” he told insuranceNEWS.com.au.

“But professional indemnity cover for financial advisers is underwritten on the merits of each individual risk and premiums are calculated accordingly. Claims history is considered as part of this calculation.”

Mr Dalton says there has been a rise in PI claims since the global financial crisis and that is affecting premiums.

“Vero closely monitors the professional indemnity book to ensure provisioning is appropriate and premiums continue to reflect risk,” he said.

“The volatility in financial markets does have an impact on premiums for advisers and there have been price rises post-global financial crisis as a result of market volatility. Continued volatility in financial markets will continue to impact premiums.”

Mr Neill says most advisers and dealer groups are reporting significant rises in premiums.

“It is those at the small to medium end of the advice market that are expecting the biggest increases,” he said.

Mr Neill says some advisers and dealer groups have experienced premium increases of 30-50%, but if they have a backlog of claims that figure could double.