There is a lot of speculation on the future of PI premiums for advisors. Are they still on the rise due claims experience, or have premiums peaked and levelled off. Or are they on the way down due to lower claims experience by medium range AFSL’s?
Whatever the case, it is the adviser once again who is subjected wearing whatever the costs their dealer group is able to negotiate with their insurers.
Some simple research indicates that if you belong to a dealer group with under 50 advisers, you are likely to be paying less and have a lower PI excess than a dealer group with 100+ advisers. The PI insurers onshore and offshore are more selective and have a better appetite for the risk a smaller dealer group presents.
Excesses can range from $10K up to $35K per claim. Premiums per advisor can be as low as $7K per year up to $16K p.a. It is no secret that some AFSL’s subsidise their advisors’ costs just to stay competitive and to keep their advisors.
Whatever type of dealer group you belong to here are some questions you need to ask to avoid any surprises both during your tenure with your current licensee or if you choose to move your business to a new one.
- What is the role of an AFSL and the provision of supplying Professional Indemnity (PI) cover for advisors?
- Is this clearly explained in your agreement?
- What is the annual cost of your PI cover?
- How do you pay this, monthly or annually in one lump sum?
- Is there an amount you must carry (Excess) in the event of a claim?
- Are there any reductions to your premium for a “no claim” bonus status?
- What are the maximum amounts you are insured against in any claim?
- What actually is PI run off cover?
- Does your Dealer Group charge for PI run-off cover?
- How is this calculated?
- Were you consulted on this capital cost?
- Did it only come to light when you requested to move from your current AFSL to another one?
- Was the notification, verbal, by hard copy letter or delivered electronically?
- Was it a legal document in addition to your original agreement?
- Is this a recent addition/clause to your cover?
- Is there a clause in your agreement allowing the AFSL to implement any charge they like with respect to PI?
- If you have had this type of request placed on you before you can move from your current licensee, how do you resolve it?
These question will help you to clarify what you can expect from your AFSL on your PI and hopefully if there is such a clause that stipulates exactly what PI run off cover conditions apply to you.