AMP CEO Francesco De Ferrari has voiced support for increased oversight of litigation funders, tying their financial backing of class actions to the escalating cost of securing professional indemnity (PI) insurance.
He told the House of Representatives Standing Committee on Economics hearing last week that major reinsurers now view Australia as a “very dangerous litigation risk”, and as a result PI premiums have shot up with potentially severe consequences for consumers.
Citing a recent study from public policy think-tank the Menzies Research Centre, he says Australia is presently the second most attractive jurisdiction for class action litigation, after the US.
The study found plaintiffs’ share of settlements has declined, falling from 59% in 2016 to 39% last year.
“So litigation plaintiffs are taking a much bigger share of the settlements,” Mr De Ferrari said. “That creates an escalating cost of doing business in Australia.
“It’s reflected in higher professional indemnity insurance. It’s reflected in the fact that today a number of the large reinsurers globally consider Australia to be a very dangerous litigation risk.
“Ultimately, that will result in a higher cost of doing business, which will result in job losses and higher costs being passed on to consumers.”
He backs the Government’s recent measures to rein in litigation funders, requiring them to hold an Australian Financial Services Licence from late next month.
The Government has also referred an inquiry into litigation funding and the regulation of class actions to the Parliamentary Joint Committee on Corporations and Financial Services. A report will be released by December 7.
“The whole area of litigation funding is a topic that I really worry about,” Mr De Ferrari said. “I welcome the Government’s push to get these litigation funders to have an AFSL licence because that will require them to also act in the best interests of the plaintiffs, which is not true, I believe, with the setup that we have today.”
But law firm Slater and Gordon has hit back at Mr De Ferrari’s comments, calling them a “kind of clumsy attack” from a financial services giant that is at the centre of two class actions – one of which is led by the law firm.
“CEOs like Francesco De Ferrari are telling politicians the solution to getting hit by class actions is to make it harder for Australians to sue them,” Head of Class Actions Ben Hardwick said. “I would argue the solution is to stop breaking the law.
“Those of us who run class actions against financial sector giants must be doing something right to trigger this kind of clumsy attack from the boss of AMP.”