AIG set to withdraw PI offerings to financial planners
AIG will cease offering private indemnity (PI) insurance to financial planners in Australia some time in the third quarter, as industry observers warn the product line remains under pressure after years of high claims losses.
US-based AIG declined to comment but insuranceNEWS.com.au understands the insurer is planning to stop accepting renewals later this year.
The looming withdrawal has sparked concerns from the Association of Financial Advisers (AFA), with CEO Phil Anderson saying the insurer has been an “important part of the market which has been under pressure for a few years”.
“The AFA is aware that AIG intends to exit the Australian financial advice PI market, and this does concern us,” Mr Anderson told insuranceNEWS.com.au. “In a hard market, with capacity limitations and rising premiums, it is never a good sign to see one of the key participants leave.
“This will impact advice licensees and those who are likely to be directly impacted, will need to engage early with their broker to find an alternative solution.
“PI insurance is mandatory for advice licensees, so this is something that we take very seriously and will be watching closely.”
Swiss Re Corporate Solutions says in a recent report that the Australian PI insurance market has been through a great deal of upheaval in recent years with insurers exiting as claims increase in both number and size.
“This instability is likely to continue for some years to come,” the Swiss Re-owned business says in the report, which highlights the PI insurance challenges facing lawyers.
The report says all states and territories require principals of a law practice to hold valid PI insurance. While firms can access this through their own state or territories’ professional association, these arrangements often provide cover up to only $2 million for each claim.
“This amount of cover is not adequate for most lawyers operating in today’s environment, in circumstances where legal costs alone can quickly erode this limit,” the report says.
A report commissioned by the Insurance Council of Australia (ICA) to look into availability and affordability of commercial insurance found the PI market has worsened in the last few years for financial planners.
