Financial planners may see their professional indemnity (PI) insurance rates rise under the Future of Financial Advice (FOFA) reforms, an Australian Securities and Investments Commission (ASIC) panel has heard.

Licensees and individual advisers must act in the best interests of their clients under the legislation.

But in the case of breaches, civil penalty provisions apply to licensees, not individual advice providers, according to ASIC Senior Executive Leader, Financial Advisers Louise Macaulay.

Administrative sanctions still apply to advisers.

Some panellists at the event in Melbourne last week raised concerns.

“It is quite likely professional indemnity insurers will be having a close look at their liabilities,” Association of Financial Advisers COO Phil Anderson said.

“Should an individual adviser seek separate PI as opposed to the licensee or the authorised rep? That’s something to look at on a policy-by-policy basis. But certainly, as an industry, we should be working towards a solution where individual advisers are covered by the existing arrangements and don’t need to go out and get their own PI.”

To much laughter, Financial Planning Association GM Policy and Government Relations Dante De Gori asked whether there were any PI providers present before commenting.

“I am concerned PI providers are going be jacking up prices and putting in conditions unreasonably as a result of FOFA because they are unfamiliar with what’s going to happen,” he said. “But there is no requirement from ASIC that individuals will get PI cover.”

PI insurers contacted by insuranceNEWS.com.au say financial planners’ rates have risen for the past three years because of losses. See other story.

They say they have no plans to increase rates because of FOFA and will monitor claims as they arise.