The Finance Brokers Association of Australia (FBAA) has warned brokers to review their professional indemnity (PI) insurance in response to an increase in award limits to be introduced by the Australian Financial Complaints Authority (AFCA).

In May the minister for revenue and financial services authorised Australian Financial Complaints Limited to establish and operate the AFCA.

The AFCA board has been working with the Credit and Investments Ombudsman board in the transition to the new body while also collaborating with the Superannuation and Complaints Tribunal and the Financial Services Ombudsman. The new arrangements are in place from November 1, 2018.

FBAA executive director Peter White said AFCA has forecast an increase in the award limits from the current maximum of $323,500 for any one claim, to $500K.

“This change means that unless brokers review and potentially increase their PI insurance levels they may not be adequately protected should a claim of this type be made after November 1,” Mr White said.

However, he said brokers who have policies with FBAA’s preferred PI Insurance provider, Insurance Advisernet Australia, will be protected.

“We have received written confirmation that the ‘Finance Brokers PI Plus Policy’ with Insurance Advisernet will be altered to cover EDR awards up to $500K for any one claim or up to $1M in the annual aggregate for all new policies and/or renewals issued as from November 1, 2018.”

“It means any existing member’s policies that fall due for renewal after this date will benefit from an automatic increase to the above limits for no additional premium charge.”

Mr White encouraged brokers with questions to contact Insurance Advisernet national product manager, Darren Loades by phone on 07 5538 7655 or email dloades@iaa.net.au.