Boutique professional indemnity (PI) insurance firm, Quadrant, is looking to expand its adviser client base after a successful soft-launch last year.
Tony Vidler, Quadrant director, said the PI offer – assembled by Hutchison Rodway broker, Phil Mitchell, and backed by QBE – attracted about 135 financial advice providers (FAP) clients through word-of-mouth after going live last year.
“We got to scale very quickly,” Vidler said, noting a rising demand among small-to-medium independent FAP market.
He said the low premiums (priced around 10-15 per cent lower than competitors last year), transparency and open-to-all structure should prove attractive to the target market.
PI cover is not mandatory for financial advisers but product providers typically require FAPs to have indemnity insurance as a business pre-cursor.
Vidler said the new NZ licensing regime changed the PI market with insurance now applied to FAPs rather than individual advisers as previously.
Most of the 8,000 financial advisers are now housed under 1,300 or so FAPs with the majority smaller operations of two to six individuals.
However, insurers usually don’t deal direct with smaller advice enterprises that instead rely on industry body-associated PI cover such as the Financial Advice NZ package.
But Vidler said Quadrant offers PI policies without the need to pay extra industry body fees while also simplifying the process.
“We’ve made it very easy for someone to get a quote, regardless of where they are, which most of the other schemes don’t allow,” he said in a statement.
The Quadrant PI cover is suitable for all types of advisory businesses including insurance, mortgages, investments and diversified operations, Vidler said.
“Premiums depend on both the size [measured in turnover] and complexity of the FAP,” he said.
For example, a small Class 1 FAP (sole-trader) dealing in simple products might face an annual PI premium of $4,500, Vidler said, while a 10-adviser business with $2 million in turnover could pay $40,000 or more per year to obtain the cover.
Quadrant also allows advisers to see policy wording before taking out cover – apparently a rare industry practice.
The group’s policy terms include “retroactive cover”, too, applying to all previous incidents even if the adviser was with another PI provider at the time.
According to Vidler, the group of insurance advisers who established the Quadrant scheme – including Royden Shotter, Jason Kilworth and Kevin Smee – were prompted by sharp increases in PI premiums by Australian insurers that did not take account of NZ market conditions.
Originally, Quadrant was working the TripleA insurance industry body, which splintered following an internal dispute last year.
“We decided to do it ourselves anyway,” Vidler said.
The group’s share of brokerage fees currently flow into a reserve fund that Quadrant intends to use for “risk retention” purposes.