Call for Greater Transparency in Professional Indemnity Insurance
Call for Greater Transparency in Professional Indemnity Insurance
2
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
The Australian Financial Complaints Authority (AFCA) is advocating for enhanced transparency concerning the Professional Indemnity (PI) insurance maintained by member companies, highlighting its current lack of oversight regarding PI insurers.
AFCA has expressed the need to access information that extends beyond the "corporate veil" involved in scenarios of administration or liquidation. The appeal comes amid background discussions with the Senate Economics References Committee, focusing on the surge in complaints it faced following the downfall of Dixon Advisory.
AFCA emphasized that even though financial services licensees are legally obligated to carry PI insurance, this insurance is not structured to function as a consumer compensation tool. AFCA outlined several limitations of current PI insurance, illustrating why it might not fully serve consumers seeking redress:
Available funds under the PI insurance might be insufficient to cover awarded compensation.
Insurance contracts may exclude coverage for specific actions that led to the compensation award.
The compensation amount might fall below the policy excess, leaving consumers uncompensated.
Complainants cannot directly file a claim on a firm's PI policy, lacking transparency over claim denials and unable to contest them.
Services may be claimed on years later, at which point the firm's insurance could have expired, especially when 'run-off' cover is inaccessible or costly.
The authority stated, "AFCA does not have jurisdiction concerning professional indemnity insurers," adding that once it makes a decision, the implicated financial firm has 30 days to comply with the determination, after which AFCA has limited oversight regarding the firm's actions.
"In general, it is assumed compensation payments come directly from firms' operational accounts, unless a firm manages to hedge against the risk through their insurance which varies widely," AFCA observed.
Furthermore, if a firm fails to heed an AFCA determination, consumers are advised to report this to the Australian Securities and Investments Commission (ASIC), as noted by AFCA.
Notably, AFCA considers that "PII is crucial for ensuring compensation against misconduct is served" and stresses that a solid Professional Indemnity Insurance framework is vital for upholding the Compensation Scheme of Last Resort (CSLR).
In the current regulatory landscape, AFCA is frequently uninformed about whether an advice licensee maintains a relevant PII policy with applicable clauses that would affect AFCA's evaluation of complaints, such as exclusions for certain advice forms or whether the coverage limit has already been reached.
The original insights were facilitated by article discussions from the Senate Economics References Committee and sourced from an industry report featured on Financial Planning's AFCA section.
Published:Monday, 2nd Dec 2024 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
The Australian life insurance sector has reported a substantial after-tax profit of $360 million for the June 2025 quarter, marking a significant increase from the $116 million recorded in the same period the previous year. This impressive growth is primarily attributed to a sharp rise in investment income and improved underwriting performance across key product lines. - read more
The Australian life insurance industry is witnessing a significant surge in mental health-related claims, reflecting broader societal challenges and increasing awareness of mental health issues. AIA Australia, a leading life insurer, has reported that mental health claims now account for 23% of its total claims, up from 15% in 2014. This trend underscores the growing prevalence of mental health conditions and their impact on individuals' ability to work and maintain financial stability. - read more
Recent data indicates a notable decline in life and income protection insurance premiums across Australia, providing consumers with more affordable coverage options. According to the latest Direct Life Insurance Report from Rainmaker Information, direct life premiums have decreased by 7% since 2024. Similarly, direct income protection premiums have seen significant reductions, with average premiums for waiting periods of 30 days and 90 days decreasing by 12% and 13%, respectively. - read more
Club Marine, Australia's largest recreational boat insurer, is celebrating its 65th anniversary in 2024. Since its founding in 1959 as Marine Hull & Liability, the company has grown from a small operation in Victoria to a nationwide provider of insurance services for the country's boating community. - read more
Insurance Australia Group (IAG) has recently announced an optimistic upgrade to its financial guidance for the fiscal year 2026, projecting a 10% increase in gross written premium (GWP) and an insurance profit ranging between $1.55 billion and $1.75 billion. This positive outlook is largely attributed to strategic acquisitions and a focus on digital transformation. - read more
Life insurance is a crucial consideration for middle-aged to older Australians. It provides financial security for your loved ones in the unfortunate event of your death. Understanding the various options available is vital to making an informed decision. - read more
Life insurance can seem complex at first, but understanding the basics can help demystify this important financial product. At its core, life insurance is a contract between you and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon your passing, in exchange for premium payments. - read more
Life insurance, a contract between an insurer and a policyholder, is designed to provide financial protection to loved ones in the event of the policyholder's death. For parents, this protection takes on a new level of significance. The birth of a child heralds a profound shift in priorities, with a focus on safeguarding the future of one's family. Hence, understanding life insurance options becomes a crucial aspect of responsible parenting. - read more
Life insurance is a cornerstone of financial planning, offering peace of mind to you and security for your loved ones. It's a contract between you and an insurance company: in exchange for regular premiums, the insurer agrees to pay a sum of money to designated beneficiaries upon your passing. This vital tool ensures that your family's financial needs can be met during an incredibly difficult time. - read more
Being prepared when it comes to life insurance claims can make a world of difference. Proper preparation helps you prevent delays and denials, ensuring that your loved ones receive the financial support promised by your policy without unnecessary hold-ups. By paying attention to the details, you can streamline the claims process, giving you and your family peace of mind during what is already a stressful time. - read more
Start Here !
Apply now for your free Insurance assessment and price comparisons!
Knowledgebase
Loss of Use: Insurance coverage that pays for the additional living expenses if your home is uninhabitable due to a covered loss.
