Treasury is calling for feedback on possibly raising the compensation cap for insurance product disputes to $1 million when the Australian Financial Complaints Authority (AFCA) starts operations in July next year.

The new authority, announced in the federal budget, will replace the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.

The Government has now released the dispute resolution framework for four weeks of public consultation, and has published a paper seeking feedback on issues such as higher compensation caps for some financial products.

The Ramsay review, which recommended the one-stop shop, found small businesses are often unable to access external complaint resolution schemes because of a limit of $500,000 on the value of the claim under dispute.

The review suggested the claims limit for the new body should be initially set at $1 million, and the compensation cap set at $500,000.

But it also suggested further consultation on whether immediately lifting the compensation cap to $1 million would have a significant impact on the availability or price of professional indemnity insurance, and whether sub-limits for different insurance products are still required.

Treasury has also called for comment on any other issues that should be considered for an effective transition to the new scheme.

All Australian financial services licensees must be members of AFCA and its decisions will be binding on all companies.

Submissions on the consultation paper are due by June 14.