Raise dispute payout cap, says ASIC
The Australian Securities and Investments Commission (ASIC) wants to raise the “cap” on compensation that can be awarded by an external dispute resolution scheme (EDR) to $280,000.
It says the increase on the cap will motivate more consumers to voice their complaints through an EDR scheme as an alternative to court action, and will reflect the increase in the value of consumers’ investments.
The proposal follows the merger of the three major financial services dispute resolution bodies into the Financial Ombudsman Service.
“This would mean that some schemes would need to lift their current limits within an appropriate transitional period,” Deputy Chairman Jeremy Cooper said last week.
Not surprisingly, the proposal has already had a mixed reception. The Financial Planning Association (FPA) has welcomed the review, but says it will consult with its members to discuss the proposal. Financial planners have been among the most fractious members of the industry’s dispute resolution scheme.
CEO Jo-Anne Bloch says the Financial Industry Complaints Service (FICS) previously committed to reviewing monetary limits next year, but “there were no commitments made to increasing limits to $280,000 any earlier”.
“We would be extremely concerned if greater pressure was applied to this issue without the appropriate consultation and consideration of the impact for members,” she said.
ASIC is encouraging all ASIC-approved EDR schemes, licensees, consumers and investors to comment on the proposal. The closing date for submissions is November 7, 2008.
The Financial Ombudsman Service (FOS) told insuranceNEWS.com.au the banking and finance and general insurance divisions will not be affected by the proposed increase, as they are already capped at $280,000. However, it will affect the investments, life insurance and superannuation division, where the current monetary limits for lump sum life insurance products are $250,000 and $6000 a month for income-stream products. A cap of $150,000 applies to all other claims in that area.
A spokesman says the ASIC proposal would also have an impact on Insurance Brokers Disputes, which has a cap of $100,000.
It says the increase on the cap will motivate more consumers to voice their complaints through an EDR scheme as an alternative to court action, and will reflect the increase in the value of consumers’ investments.
The proposal follows the merger of the three major financial services dispute resolution bodies into the Financial Ombudsman Service.
“This would mean that some schemes would need to lift their current limits within an appropriate transitional period,” Deputy Chairman Jeremy Cooper said last week.
Not surprisingly, the proposal has already had a mixed reception. The Financial Planning Association (FPA) has welcomed the review, but says it will consult with its members to discuss the proposal. Financial planners have been among the most fractious members of the industry’s dispute resolution scheme.
CEO Jo-Anne Bloch says the Financial Industry Complaints Service (FICS) previously committed to reviewing monetary limits next year, but “there were no commitments made to increasing limits to $280,000 any earlier”.
“We would be extremely concerned if greater pressure was applied to this issue without the appropriate consultation and consideration of the impact for members,” she said.
ASIC is encouraging all ASIC-approved EDR schemes, licensees, consumers and investors to comment on the proposal. The closing date for submissions is November 7, 2008.
The Financial Ombudsman Service (FOS) told insuranceNEWS.com.au the banking and finance and general insurance divisions will not be affected by the proposed increase, as they are already capped at $280,000. However, it will affect the investments, life insurance and superannuation division, where the current monetary limits for lump sum life insurance products are $250,000 and $6000 a month for income-stream products. A cap of $150,000 applies to all other claims in that area.
A spokesman says the ASIC proposal would also have an impact on Insurance Brokers Disputes, which has a cap of $100,000.