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ASIC proposes tighter indemnity cover laws

By: admin|

One thing many aspiring Finance/Mortgage brokers may not be taking into consideration is the current high costs of professional indemnity insurance cover. Recent GFC has seen a doubling of insurance costs globally and now with ASIC’s new requirements for cover relating to all new and existing brokers must stop to consider the added costs to their business models.

A consultation paper issued by ASIC says that all licensees that are not exempt will need to hold insurance cover at a set minimum of either $2 million per claim or another amount depending on the nature of their business. ASIC will require the cover to meet expected revenue from credit activities, relating to consumers only, up to a capped maximum of $20 million. A run off cover to ensure claims can be met after the insurance cover has ended to meet any claims made after the insurance policy has ended, that have risen from the acts or commissions of the insured during the period of insurance cover.

ASIC is looking to ensure that adequate compensation mechanisms are in place, whilst not causing credit licensees to incur unreasonable costs in settling compensation arrangements. Business regulated by APRA are exempt.

Final regulatory guide covering this regulation will be finalised early next year and its expected to be in march.

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