Call for Greater Transparency in Professional Indemnity Insurance
Call for Greater Transparency in Professional Indemnity Insurance
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.
Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.
In recent weeks, Australia's leading insurance companies, including Insurance Australia Group (IAG), Suncorp (SUN), and QBE Insurance (QBE), have experienced notable declines in their share prices. This downturn is largely attributed to growing investor concerns about the potential disruptive impact of artificial intelligence (AI) on the traditional insurance business model. - read more
In 2026, Australian insurers are grappling with significant challenges as premium affordability becomes a pressing concern. A recent survey by Gallagher Bassett highlights that 70% of insurers have reported increased claim costs and frequencies over the past year. This surge is largely attributed to escalating climate-related losses and inflationary pressures affecting materials and labour costs. - read more
In a significant development for Australian small and medium-sized enterprises (SMEs), Zurich has partnered with US-based cyber insurance specialist Cowbell to introduce an AI-driven cyber insurance product tailored for businesses with annual turnovers up to $100 million. This collaboration marks a pivotal step in enhancing cyber resilience among Australian SMEs. - read more
In a landmark decision, the Australian Financial Complaints Authority (AFCA) has directed an insurer to honor an arson-related claim for a restaurant, despite the non-disclosure of the director's criminal history during the policy's inception. This ruling underscores the complexities surrounding disclosure obligations and the interpretation of policy terms. - read more
The New South Wales Productivity Commissioner, Peter Achterstraat, has recommended the prohibition of commissions received by strata managers for securing insurance and other contracts. This move aims to enhance transparency and protect the interests of apartment owners, especially as strata living becomes increasingly prevalent in Sydney. - 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
As the landscape of finance and personal security evolves in Australia, the importance of being insured has never been more prominent. In a world of changing family dynamics, economic pressures, and higher living costs, life insurance stands as a bastion of support ensuring the well-being of loved ones in the event of unforeseen circumstances. - 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
For many millennials, navigating the complexities of personal finance and future planning can feel like a bewildering journey. Among these financial responsibilities, life insurance emerges as a paramount consideration. More than just a safety net, life insurance can be the cornerstone of a sound financial strategy, providing peace of mind for both the policyholder and their loved ones. - read more
When you’re young, life is all about new experiences and making plans for a promising future. While factors like travel, career, and relationships often take centre stage, one aspect often overlooked is life insurance. It might seem like something to consider later in life, but starting a policy while you're young can be a savvy financial move. - read more
Start Here !
Apply now for your free Insurance assessment and price comparisons!
Knowledgebase
Underwriting: The process by which an insurer determines the risk of insuring a client and decides the terms of coverage.
