After years of steep increases for Professional Indemnity insurance premiums, a pair of brokers believe the tide has turned.
PI premiums had already risen over the previous years, which was expected to be further compounded after AIG was due to pull out of the market last September, further restricting competition in the industry.
Additionally, several Lloyds syndicates withdrew from the PI sector in late 2019, on top of providers Dual Australia, Vero, and Axis in the preceding years.
Howden Broking partner-financial lines Jared Timms says it was expected the departure of AIG would have a negative impact, which has not turned out to be the case.
“We’ve seen a couple of other international insurers probably out of Europe and America who are keen to dip their toes back into it on a conservative basis which is providing some additional capacity,” Timms says.
“But then Lloyds, overall, is probably becoming a bit more aggressive probably across various segments of the market including financial planning PI.”
Despite rumblings that self-licensed advisers could be the next frontier for compliance issues, Timms says the independent financial adviser (IFA) sector has been “good” from an insurer’s perspective.
“The smaller, boutique self-licensed, founder-led firms [are] just not seeing a lot of claims activity, and when they do it might be an AFCA complaint where the costs don’t typically stack up too much as opposed to a systemic issue that might occur within a dealer group,” Timms says.
“The corrective action that’s taken place over the past few years is starting to reap benefits for insurers which will overall lead to better outcomes for the IFA and self-licensed community.”
Timms’ perspective backs up that of Paul Harding-Davis who wrote for Professional Planner that PI insurers are willing to give lower premiums to self-licenced firms.
GSA Insurance Brokers head of professional and financial lines Ryan Neary says the market “is definitely softening”.
“It’s a lot easier for planners to advise us to obtain competitive programs,” Neary says.
“That’s been predominantly driven by local insurance here and securing further capacity and having expanding appetites and the London market actually coming back quite aggressively into the Australian market.”
Despite the Hayne royal commission impacting the perception of the financial advice sector and introducing further regulatory reforms, Timms says this had little impact on the PI insurance market.
“The main impact from the royal commission was that insurers were scared to re-enter the space or enter it at all,” he says.
“Basically, they went on to sit on the sidelines and sort of see how everything played out and what resulted from that.”
Consequently, there was a decrease in the number of insurers competing in the sector, affecting availability and driving premiums higher.
“But now that it’s all said and done, it’s had a positive impact on the industry, compliance-wise and in terms of the educational standards,” Timms says. “This is translating into a further positive impact as insurers are more confidence to enter the sector.”