IFSO and FSCL cap hits half a million

In July 2024 the financial cap (also referred to as the applicable monetary limit) for approved financial service Dispute Resolution Schemes, including IFSO and FSCL, will increase to $500,000.

These increases represent a 2 ½-fold increase in the IFSO maximum lump sum monetary limit in less than a year. The previous $200,000 IFSO limit increased to $350,000 in September 2023. FSCL increased its limit to $350,000 in March 2022.

The IFSO applicable weekly amount will remain unchanged, as the current amount ($2,730 plus GST) is higher than the amount provided in the Regulations. The special compensation maximum (for non-financial loss related to the member’s conduct or for loss of opportunity) increases from $5,000 to $10,000.

Our comments

A jurisdiction limit of half a million dollars in a forum where there is no obligation to apply the law and with limited appeal rights is concerning.

The provision of free dispute resolution is undoubtedly beneficial for consumers. And for complaints involving straightforward issues or compliance with industry codes, the dispute resolution schemes can provide a useful service. However, concerns remain about the suitability of dispute resolution schemes to resolve complex disputes, particularly where there are factual disputes or complex medical or technical evidence. In response to MBIE’s consultation about proposed changes to the schemes, insurers pointed out that complex insurance products such as for liability insurance and business interruption would be more appropriately determined outside a dispute scheme. Unfortunately, MBIE has not taken this advice.

Insurers and brokers providing liability cover for financial advisers should be considering whether their policy wordings (particularly those providing quasi-judicial cover) accurately reflect the cover they wish to provide/obtain in light of the increased limits.

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IFSO and FSCL cap hits half a million

Fee Langstone