Financial lines premiums may rise when the Australian Financial Complaints Authority (AFCA) starts accepting legacy disputes in July.

In February the Federal Government announced an extension to the dispute resolution body’s remit to allow for the investigation of complaints dating back to January 2008.

Presently AFCA can only consider cases lodged a maximum of six years previously, or two years if the complaint has been through a company’s internal dispute resolution process.

The change means it will be required to take up historical cases that were not handled by its predecessor, the Financial Ombudsman Service.

Barry.Nilsson Lawyers Associate Kingsley Grimshaw believes the changes may lead to increased claims costs for insurers that provide financial services-related covers.

“If the changes have their desired effect, AFCA will see a surge in the number of claims it receives from July 1 this year,” Mr Kingsley told insuranceNEWS.com.au.

“For insurers, that would mean an increase in claims and associated costs relating to AFCA complaints against insured financial service providers… therefore, it is certainly plausible that the changes will apply some pressure to financial lines premiums.

“A compounding issue for insurers is the fact the additional claims are likely to relate to matters that occurred a long time ago. Such matters are inherently more difficult and costly to respond to.”

The Financial Planning Association (FPA) is concerned professional indemnity (PI) cover may not apply to legacy disputes, leaving members exposed if AFCA rules against them.

It says the change could also raise the cost of buying PI cover.

“The FPA is concerned about whether professional indemnity policies put in place about 2008 will cover a potential legacy complaint,” it says in a submission on the change.

“If PI cover does not extend to legacy complaints under the conditions set in the proposed rules change… this will have a significant impact on the ability of licensees to pay any determinations made by AFCA in relation to legacy complaints.

“Initial feedback from the insurance industry indicates that PI cover may be more expensive in the future should there be an increase in claims arising in relation to legacy complaints.”