It updates existing systems of professional indemnity cover to bring them into line with the licensing requirements of the Financial Services Legislation Amendment Act (FSLAA) of 2019.
This law imposes a tough regime of FAP licences on the industry.
“Previously, financial advisers had individual cover,” said Clinton Stanger of Curated Risk.
“Since FSLAA came in, it made more sense that the structure of professional indemnity insurance should be in the name of the licence holder, that's the FAP holder.”
Stanger said the new PI was a civil policy and covered cases taken against advisers by clients disgruntled with the advice they received.
“On top of the professional insurance cover there is management liability cover, which is an amalgamation of lots of previous liability cover. Statutory liability is one of the more important ones for our profession and also there is a cyber risk insurance policy.”
The new system has been made available to clients for about a week with a deadline by the beginning of July.
In monetary terms, Stanger said the level of cover would be decided by the FAPs themselves.
“But commonly it could be anywhere from $1 million to $2 million or up to $5 million as a limit.
“If a FAP needs a higher limit than $5 million, then we have access to insurers to provide that cover.”
Stanger would not divulge the level of premiums except that they were “very similar to last year”, and would vary more than previously.
Financial Advice New Zealand chief executive Katrina Shanks said the new system had several advantages.
She said in the past, the insurance scheme tried to fit all advisers into a box.
“What advisers will now find is an insurance scheme that is bespoke to their needs.”
In addition, previous caps have been removed.
“It is a modern new relevant product.”
The scheme also has new insurance companies backing it: Ando and Berkshire Hathaway, in place of NZI and QBE.
