New PI limit too high, say brokers
Brokers aren’t happy about a looming increase in the claims limit being imposed by the Financial Ombudsman Service (FOS) as it takes on the role formerly undertaken by Insurance Brokers Disputes Limited (IBD).
The handover of IBD has effectively been completed, but the National Insurance Brokers Association (NIBA) says new FOS terms of reference come into force from January 1 next year and won’t be met by brokers’ professional indemnity (PI) insurance.
ASIC says all dispute resolution schemes across the financial services industry should move to a common limit of $280,000. But the new FOS terms of reference released for public comment in March suggest this should be raised to $300,000.
The limit for brokers currently stands at $100,000, and NIBA CEO Noel Pettersen says it would be “very difficult” for brokers to find cover for $280,000 or $300,000.
“We’re concerned that they’re seeking to impose limits that basically can’t be supported by the real market,” Mr Pettersen told insuranceNEWS.com.au.
“They should be speaking to PI insurers and doing further research before these things are implemented.”
In a submission to FOS, NIBA says successful claims against brokers of more than $100,000 would not be paid automatically by the relevant PI insurer. Brokers making any additional payment could be in breach of their PI policies and lose any entitlement to claim.
Mr Pettersen says the present system works well for insurance brokers and that the level of claims under the IBD scheme was “very low”.
The handover of IBD has effectively been completed, but the National Insurance Brokers Association (NIBA) says new FOS terms of reference come into force from January 1 next year and won’t be met by brokers’ professional indemnity (PI) insurance.
ASIC says all dispute resolution schemes across the financial services industry should move to a common limit of $280,000. But the new FOS terms of reference released for public comment in March suggest this should be raised to $300,000.
The limit for brokers currently stands at $100,000, and NIBA CEO Noel Pettersen says it would be “very difficult” for brokers to find cover for $280,000 or $300,000.
“We’re concerned that they’re seeking to impose limits that basically can’t be supported by the real market,” Mr Pettersen told insuranceNEWS.com.au.
“They should be speaking to PI insurers and doing further research before these things are implemented.”
In a submission to FOS, NIBA says successful claims against brokers of more than $100,000 would not be paid automatically by the relevant PI insurer. Brokers making any additional payment could be in breach of their PI policies and lose any entitlement to claim.
Mr Pettersen says the present system works well for insurance brokers and that the level of claims under the IBD scheme was “very low”.