Compensation caps for insurance, credit and advice disputes heard through the Australian Financial Complaints Authority (AFCA) should be increased to $2 million, a Senate committee has recommended.

The caps have already been increased under AFCA compared with predecessor the Financial Ombudsman Service (FOS), but the committee wants them raised further without waiting for a scheduled statutory review.

“The committee considers that some of these parameters can be revised now, rather than in 18 months,” it says in a report on financial service provider dispute resolution within the justice system.

The AFCA compensation cap for most non-superannuation disputes is $500,000, compared with $323,500 under FOS. The monetary limit was raised to $1 million from $500,000.

The Senate committee also proposes removing a compensation sub-limit of $250,000 for general insurance broking.

NSW Legal Aid told the committee it supports the higher cap, giving an example of disaster victims who have made home insurance claims and then had to rebuild to higher standards.

“The cost of rebuilding may have increased greatly because of new restrictions such as bushfire requirements that they have to incorporate into their homes,” Senior Solicitor Consumer Law Dana Beiglari told a hearing.

The Senate committee also recommends extending AFCA membership to include professional indemnity insurers of financial service providers. The report notes law firm Maurice Blackburn says the change would be consistent with regimes that enable a claimant to look beyond the “insured wrongdoer” and seek recovery directly from the insurer.

The proposal would require a change to the operation of the Corporations Act and to AFCA rules, but the report says AFCA considers it “appropriate for this to be reviewed”.