Brokers are being warned to make sure they hold the right professional indemnity cover (PI) after the Australian Securities and Investment Commission (ASIC) increased the maximum claim that can be awarded.
An approved External Dispute Resolution (EDR) Facility can now award a maximum claim of $323,500, up from the previous amount of $309,000.
The Finance Brokers Association of Australia (FBAA) is concerned many brokers will not know about the increase, which began at the start of the year, and has advised them to take care, particularly with the current publicity around the finance broking sector.
FBAA executive director Peter White said members should check with their insurers and aggregators to ensure they are adequately covered for the new increased limit.
He added: “We know what lawyers are like and are concerned that risks to brokers have risen in the current environment, notwithstanding that there are no legitimate reasons for claims to increase.”
Insurance Advisernet (IA) is the preferred PI provider to FBAA members, and spokesperson Darren Loades said their ‘Finance Brokers PI Plus’ policy has already been amended to cater for this increase. While IA’s policy has a nil excess on EDR type claims, not all policies are the same.
Loades said: “If you’re unlucky enough to be involved in a PI claim these days, approximately 90% will be lodged via an EDR Facility so brokers need to ensure that their policy meets the current requirements.”
“Brokers need to know what type of excess they will have to pay and if that’s affordable for them. If brokers are not aware of the risks and obligations on their PI policy, they could end up having to pay their own legal costs and subsequent EDR compensation awards as a result of any litigation.”
He said the percentage of claims the company is seeing in this category is rising rapidly and believes this trend will continue as interest rates eventually increase.
FBAA members can access a Financial Ombudsman Service and every broker must be a member of an external dispute facility.