If you are a CPA or FCPA accountant in Australia, professional indemnity insurance is not just nice to have. It is a core requirement that sits alongside your Public Practice Certificate obligations and quality controls. This guide explains basic rules, the cover features to look for, and the practical choices that tend to influence price.
Your premium (or cost you pay for your insurance) is based on various factors, depending on the insurance provider, the market conditions and economic environment, as well as your specific circumstances. Here are some examples:
If your business turnover is below $2 million and you employ fewer than 10 people, Marsh can offer a free quote online. If you need to cover a larger firm, the best thing to do is to talk to a Marsh broker to determine the coverage you need and discuss what that cost will be.
Get a free online professional indemnity quote from Marsh!
Selected services |
Selected business annual turnover |
Selected PI limits |
Selected PL limits |
Cost starting from* |
Accounts preparation and bookkeeping |
$200,000 |
$2,000,000 |
Not selected |
$ 752 annually |
Accounts preparation and bookkeeping |
$200,000 |
$2,000,000 |
$10,000,000 |
$1,153 annually |
Accounts preparation and bookkeeping |
$500,000 |
$5,000,000 |
$10,000,000 |
$2,559 annually |
Accounts preparation and bookkeeping Taxation / GST; Accounting software |
$500,000 |
$10,000,000 |
$10,000,000 |
$3,496 annually |
*The price indicated is for policy premium only and is exclusive of GST, stamp duty, levies, service/broker fees, and credit card surcharge where such additional fees apply. Premium prices may start at this price and are subject to fluctuate depending on the level of risk/cover chosen when applying for cover as determined by the relevant insurer.
A retroactive date defines how far back in time a loss can occur for your policy to cover your claim. If a claim happens prior to your retroactive date, your policy won't provide benefits. It is a feature of the “claims-made” Professional Indemnity insurance.
Claims made coverage protects you for claims filed against you during the current insurance period, regardless of when the incident occurred, provided there is no retroactive date limit. When you (the insured) are first notified of a potential claim or incident, it is the current policy that the claim/incident will fall under.
Policies that are costs inclusive can erode your limit during defense. Costs exclusive limits pay defense costs over and above the limit and may better protect the sum available to meet damages.
Inclusive excess means the insured must pay the amount of the excess towards the legal and defence costs upfront.
Costs exclusive excess means the insured does not pay any excess towards the legal and defence costs but only pays the amount of the excess towards the settlement of any claim.
Look for appropriate sub-limits for items such as inquiry costs, loss of documents, libel and slander, fraud and dishonesty, fidelity, outgoing and incoming principals.
Professional indemnity policies are written on a ‘claims made’ basis. This means that the policy will only respond to claims, which are made against an insured and notified to the insurer during a current policy period, irrespective of when the work was performed by the insured. If the policy has expired, lapsed or cancelled, no additional claims can be made under the policy, as it is not current.
There is a potential for claims to be made against an insured after a business is wound up, has ceased trading or you are retiring. If a claim is made at a time in the future and there is no insurance policy in place, there would be no protection for the insured.
A run-off insurance policy can be purchased prior to cessation of the business. It will provide coverage to an insured for future claims made against them which arise from acts, errors or omissions which occurred prior to the inception of the run-off policy. Run-off policies can be purchased on an annual basis, or a multi-year basis with one upfront premium payment.
The limit of indemnity is the maximum amount payable under a policy during a policy period. Some policies may include an automatic reinstatement clause, which restores the limit of indemnity after it has been exhausted by a claim or series of claims, allowing coverage for multiple unrelated claims that together exceed the original limit. However, no single claim payment will exceed the stated limit of indemnity.
Vicarious liability refers to a situation where someone is held responsible for the actions or omissions of another person. A principal or you the insured can be considered vicariously liable for the actions of your contractors/sub-contractors under your supervision or direction.
In other words, you, the insured, can be sued for the actions or mistakes of your contractors, you can be vicariously liable.
Topic |
What good looks like |
Why it matters |
Limit and reinstatements |
Limit sized to your work with one or more automatic reinstatements |
Maintains protection if there are multiple claims in the period |
Defence costs |
Costs exclusive limit where available |
Preserves the full limit for damages and claimant costs |
Excess |
Costs exclusive excess |
Avoids paying an excess if there is no settlement or judgment |
Retroactive date |
Unlimited retroactive cover or at least seven years |
Ensures older work is within the scope of cover |
Services covered |
All current and planned services listed and not excluded |
Prevents gaps for areas like insolvency, valuations or audit |
Extensions |
Appropriate sub-limits for inquiries, documents, libel and fidelity |
Adds useful cover for frequent side exposures |
Notifications |
Process documented with your team |
Claims made policies rely on timely notice |
Your policy responds to claims made and circumstances notified during the policy period. If you become aware of a matter that may lead to a claim, notify your insurer within the period. The underlying act can have occurred earlier if it is within the retroactive cover.
The retroactive date is the earliest date from which your past work is covered. CPA Australia guidance expects a retroactive date no later than seven years before the policy period begins unless the policy provides unlimited retroactive cover.
PI policies aggregate claims to the limit for the policy period. Automatic reinstatements refresh the limit after a claim, which helps if there is more than one matter in the year.
If defence costs are included within the limit, every dollar spent on investigation and defence reduces the amount left to pay damages and claimant costs. Costs exclusive limits pay defence costs in addition to the limit.
With a costs inclusive excess you may pay the excess even if no settlement is paid. With a costs exclusive excess the excess typically applies only when a settlement or judgment is paid.
Accounting, bookkeeping, taxation, auditing and assurance, insolvency and corporate reconstruction, management accounting and consulting, financial planning or advice, forensic accounting, credit services, valuations, transactional accounting and financial reporting are within the definition of public accounting services. Always confirm your exact scope with your broker and policy wording.
Mergers and acquisitions need to be disclosed. Policies may require notice within a set period. Additional premium may apply to extend cover to the new entity or past work.
Any fact, situation or circumstance which a reasonable person in your position would consider may result in a claim. When in doubt, speak with your broker and consider notifying.
There is no one size fits all. Consider contract requirements, fee size, service types, client profile, Professional Standards Legislation and your risk appetite. Your broker can model options.
References
Marsh Advantage Insurance Pty Ltd (ABN 31 081 358 303, AFSL 238369) (“Marsh”) arranges the general insurance (i.e. not the Discretionary Trust Arrangement) and is not the insurer. This page contains general information and does not take into account your individual objectives, financial situation or needs. For full details of the terms, conditions and limitations of the covers, refer to the specific policy wordings and/or Product Disclosure Statements available from Marsh on request. Marsh makes no representation or warranty concerning the application of policy wordings or the financial condition or solvency of insurers or re-insurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. The Discretionary Trust Arrangement is issued by the Trustee, JLT Group Services Pty Ltd (ABN 26 004 485 214, AFSL 417964) (“JGS”). Any advice or dealing in relation to the Discretionary Trust Arrangement is provided by JLT Risk Solutions Pty Ltd (ABN 69 009 098 864, AFSL 226 827) (“JLT”). JGS and JLT are businesses of Marsh McLennan. The cover provided by the Discretionary Trust Arrangement is subject to the Trustee’s discretion and/or the relevant policy terms, conditions and exclusions.
LCPA 25/1034