Financial planners have been urged to work more closely with their insurance brokers and embrace professional indemnity (PI) insurance as a risk management tool rather than a “grudge purchase”, according to a planning expert.

Michael Gottlieb, a director of Mega Capital and an expert member of the Financial Planning Association’s (FPA) PI panel, says the collapse of Westpoint property group shows why PI insurance should be compulsory for planners.

He told Sunrise Exchange News financial planners are concerned the PI insurance market will harden once the effects of the Westpoint collapse are felt, but this hasn’t happened so far.

“We don’t expect the PI insurance market to harden as a result of Westpoint, despite some industry commentators indicating insurers will raise premiums,” he said.

“Insurers have already settled certain Westpoint claims at a cost of several million dollars, and there has been absolutely no negative impact on the cost of PI for the remainder of the industry.”

Mr Gottlieb says planners may be unaware of, or confused about, the application of the deductible in PI insurance. It is important that they find out from their insurance brokers how insurers may apply the deductible in the event of a claim.

He says a broker should be chosen based on knowledge of the insurance market, the issues relevant to the financial planning industry and experience in dealing with financial planning risks.