The Financial Planning Association of Australia is urging AFCA immediately consider and investigate the potential impact of its proposed legacy claims rule on professional indemnity insurance, with fears the cost of PI cover may rise.
The FPA is concerned planners may not be covered under professional indemnity insurance for complaints revisited under the proposed AFCA legacy complaints rule, and is worried about increases in to the cost of PI cover.
Under the proposed rule, AFCA's jurisdiction will be expanded, allowing the dispute resolution scheme to visit eligible conduct complaints dating back to 1 January 2008.
The FPA said it supports the intent of the change, noting consumers should "have the ability to have their complaints heard and have the opportunity to seek redress."
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However, in a submission to AFCA's consultation on the proposed rule change, the association said it was concerned professional indemnity policies may not cover complaints more than 10 years old.
"We are concerned about whether professional indemnity policies will cover potential legacy complaints," FPA chief executive Dante De Gori said.
"If PI cover does not extend to legacy complaints under the conditions set in the proposed rules change - particularly in relation to the application of the 30 June 2019 rules, jurisdiction and monetary limits to legacy complaints - this will have a significant impact on the ability of licensees to pay any determinations made by AFCA in relation to legacy complaints."
Additionally, the association said "initial feedback" from the insurance industry suggested PI prices would increase if more claims were made for legacy complaints.
"Initial feedback from the insurance industry indicates that PI cover may be more expensive in the future should there be an increase in claims arising in relation to legacy complaints," he said.
"This may include complaints that may have fallen outside the jurisdiction of predecessor schemes as set in the terms of reference applicable at the time the conduct occurred, which may now be accepted under the AFCA rules as at 30 June, 2019."