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.

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.

Share this news item:

Insurance News

Clear

WFI Insurance and Rural Aid Join Forces to Assist Farmers in Crisis

02 Feb 2026: Paige Estritori

In a significant move to bolster support for Australia's agricultural sector, WFI Insurance has announced a formal partnership with Rural Aid, a leading rural relief charity. This collaboration is set to provide much-needed assistance to farmers and rural communities affected by recent natural disasters, including the devastating bushfires in Victoria and severe weather events in Queensland. - read more

Elders Insurance Warns Farmers of Escalating Summer Storm Threats

02 Feb 2026: Paige Estritori

As the Australian summer approaches, Elders Insurance is calling on farmers to brace for an anticipated increase in storm-related damages. Recent claims data reveals a concerning trend, with summer months accounting for nearly half of all storm-related farm insurance property claims over the past two years. - read more

AFCA Observes Significant Increase in General Insurance Complaints

01 Feb 2026: Paige Estritori

The Australian Financial Complaints Authority (AFCA) has reported a 17% increase in general insurance complaints for the year ending June 30, 2025, totalling 34,231 cases. This uptick is primarily attributed to issues surrounding add-on covers and delays in motor vehicle insurance claims. - read more

APRA's Findings: Stability in PI Claims and Decreasing Premiums

01 Feb 2026: Paige Estritori

The Australian Prudential Regulation Authority (APRA) has released its latest National Claims and Policies Database, providing valuable insights into the professional indemnity (PI) insurance sector for the 2022 underwriting year. The data indicates that PI claims payments for non-facility business remained relatively stable at $1.111 billion, a slight increase from $1.109 billion in the previous year. - read more

Upcover's New Insurance Solutions for Australian Nurses

01 Feb 2026: Paige Estritori

Sydney-based insurtech company Upcover has unveiled a new professional indemnity and public liability insurance product tailored specifically for nurses across Australia. This initiative aims to provide comprehensive coverage that meets the unique needs of nursing professionals, including nurse practitioners, in-patient nurses, doulas, and nursing students. - read more

Click for more Insurance News