Friday 1st of May 2009

The Institute of Financial Advisers (IFA) has slammed insurance firm Lumley for unfairly rejecting the professional indemnity (PI) claims of many of the industry body's members. In a statement issued yesterday, the IFA said Lumley had shown "a distressing pattern of behaviour" in rejecting PI claims from financial advisers. Tony Vidler, IFA director, said "several dozen" advisers had provided strong anecdotal evidence that Lumley was "consistently" knocking back legitimate PI claims. "Incredibly, Lumley's has decided to apply some twisted logic in reading its own policy wording to suit its claims management objectives," Vidler said in the IFA press statement. However, Lumley refuted the IFA criticisms in a statement issued to Good Returns. "All claims presented are treated on their individual merits, and in accordance with the specific policy cover," Lumley said. "Given the variety of coverage, and the individual circumstances of each claim, it is difficult to offer generalisations on policy response, but we can offer assurance that all claims are evaluated fairly, and in accordance with the policy wording." According to the IFA statement, Lumley provides PI cover to approximately 75-80% of the financial advisory industry, mainly via group schemes including the IFA's own offering. Vidler said the IFA was in talks with a number of alternative insurers "both here and offshore" to provide PI cover to its members. "We're confident the PI cover is available," he said. "We're also talking to the Financial Planning Association in Australia who recently negotiated a PI solution for its members." Vidler said another option would be to drop the requirement for New Zealand's financial advisers to take out PI cover, which is stipulated by many product providers and is currently IFA policy. "It would be very easy to do," he said. Vidler estimated that New Zealand's financial advisers spend between $800-5,000 each year to secure PI cover. It is understood PI insurers have seen a strong increase in claims and notifications from advisers, chiefly due to the collapse of finance companies and fund shutdowns over the last two years.