Confirmed: How PI premiums have hit financial advisers

Mike Taylor

Managing Editor and Publisher

11 May 2023

New data has confirmed just how hard professional indemnity (PI) premium costs have been hitting financial advisers and others in the financial services sector.

Amid confirmation in the Federal Budget that the Government will be relying on the Australian Securities and Investments Commission funding levy to help underwrite some of the cost of the Compensation Scheme of Last Resort (CSLR) and greenwashing measures, new data from the Australian Prudential Regulation Authority (APRA) has revealed how advisers and others have faced almost a decade of rising PI premiums.

The APRA data, contained within its National Claims and Policy Database analysis, pointed to the average PI premium growing by 27% since 2015 but higher for those working in financial services.

In fact, the APRA analysis said that accountants, financial planners and brokers/dealers had all had an average premium increase of at least 40% since 2015.

“Total premium volumes grew modestly over 2009 to 2016 at an average increase of 3.2% p.a. Premiums volumes then escalated over 2017 to 2020 at an average increase of 12% p.a. – increasing from $0.9bn to $1.4bn,” the APRA analysis said.

The APRA analysis included financial advisers on a list of occupations which had encountered significant industry premium movements.

Looking at the “financial’ group, it said average premiums increased by a similar amount across most occupation subgroups.

“The largest increase in premiums was for Brokers and Fund managers (also accompanied by a large increase in risk counts). While average premiums also increased significantly for Financial Planners/Advisers – this was accompanied by a large reduction in risk counts (which may instead be indicative of changes in measurement of risk counts rather than price increases).”