A professional standard scheme could be set-up as a way to combat the broker and consumer risk of the use of an unauthorised foreign insurer (UFI), according to one Queensland broker.
Helena Blum, of Big Tree Insurance, has highlighted the scheme as a way to limit the liability a broker would face in the event of litigation regarding an unpaid claim through a UFI.
Blum’s calls come in the wake of the news that finance minister Mathias Cormann believes that broker PI, alongside a waiver, could be used to cover an unpaid claim from a UFI.
“Members of a professional standard scheme generally have their civil liability limited which means that there is a maximum level of compensation available to a client, in the event a claim is successful and damages are awarded by the courts. At present, our industry operates without this which means clients can sue us above and beyond our current indemnity insurance limits.
“Right now we’re faced with a government that will allow UFI’s into Australia to provide alternatives for the consumer, and it appears that this will be on an all care and no responsibility basis, in so far that the government have suggested that the responsibility for assessing the prudential management of the UFI will sit with the insurance broker recommending the product.
Blum responded to Cormann’s idea of a waiver issued to consumers to cover a broker is a UFI fails to pay a claim or hits financial difficulty and is unable to pay out.
“Suggestions have been made that a waiver should excuse the responsibility that rests with an insurance broker, but it’s my understanding that the courts aren’t particularly fond of disclaimers and waivers, especially when a professional could be seen to hide behind a paper, that essentially documents their inabilities to deliver on the professional service they’re supposed to be able to do.”
Blum calls for “some degree of protection” for both brokers and consumers and believes a professional standard scheme could provide a safety-net for all parties.
“A professional standard scheme would provide our industry with some protection because it would limit our civil liability in the event of a claim, and hopefully, our professional indemnity insurers would be working within a somewhat more predictable environment when it came to policy terms, costs and availability of cover at renewal.
“A professional standard scheme would also provide consumers with some level of confidence, in knowing that if the consumer engages the services of a member of the scheme, there will be insurance available to pay damages in the event of a successful claim.”
