What is Professional Indemnity for Accountants?

Professional Indemnity is a type of insurance designed to protect professionals and their businesses from client disputes when their provided professional services’ fall short of expectations or the established legal duty of care. Even in cases where these claims are without merit, defending against these allegations can be costly and toilsome to businesses. In some instances, opting for a settlement might be preferable to the uncertainty and expenses of a prolonged litigation process.

Professional Indemnity is an essential and obligatory component of risk management for Accountants who practice in Australia. Whether you’re a small local firm or a large national network, navigating the regulatory or professional requirements for Professional Indemnity can be a complex compliance minefield.

At KBI, we have the experience and expertise to ensure that you have a robust Professional Indemnity policy that offers you with peace of mind against potential allegations and complies with ASIC and your Professional Body’s requirements.

Why is Professional Indemnity Insurance needed?

Buying Professional Indemnity Insurance is becoming standard practice for all businesses that provide professional services and advice as it is an easy way to transfer the risk so you can manage your business with confidence that your assets are protected.

A Professional Indemnity Insurance Policy typically protects you against:

  • Damages awarded to claimants,
  • Legal costs incurred by you and, possibly, the claimants,
  • Claims investigation costs,
  • Public relation costs;
  • Other expenses associated with the claim.

Professional Indemnity insurance is sometimes a contractual requirement or compulsory insurance, such as the ASIC requirement to comply with RG 126 for Australian Financial Service Licensees (AFSL) who deal with retail clients.

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What should my Professional Indemnity Insurance cover?

Below is not an exhaustive list of the policy coverages, but at a minimum your Professional Indemnity insurance should provide the following:

  • Civil Liability Insuring Clause: Indemnifies the insured against civil liability arising out of the performance of their professional services (e.g. accounting services, tax, audit etc.).
  • Advancement of Defence Costs: Legal costs is often a main driver in limit erosion and a robust Professional Indemnity policy will provide you with financial certainty as the defence costs can be paid by you insurer prior to the final resolution of a claim.
  • Defence Costs in Addition (‘DCA’) or Costs Inclusive (‘DCI’): Whether your policy form is DCA or DCI, ensure that your limit of liability is adequate and complies with your coverage requirements.
  • Contractors & Consultants: Includes cover for contractors or consultants that are “deemed workers” under the applicable Workers Compensation laws and have a written contract with an insured entity to perform professional services on behalf of the insured entity.’
  • Fidelity: Coverage for loss of money belonging to an insured entity or for which the insured entity is legally responsible (e.g. clients’ trust accounts), resulting from fraud by employees.
  • Limitation of Liability: Ensures that an insured’s right to indemnity is not prejudiced by contracts entered into with other parties that exclude or limit their liability.
  • Contractual Liability: provides coverage for insured’s civil liability in respect of a claim under an indemnity term of a contract to the extent that such civil liability arises out of the insured’s performance of professional services.

Accountant’s Professional Indemnity Coverage Guidelines

The below are common principles and guidelines that apply to your Professional Indemnity insurance requirements:

  • Professional Bodies: Professional bodies such as the Institute of Chartered Accountants in Australia (CA ANZ), Certified Practising Accountants Australia (CPA Australia), or the Institute of Public Accountants (IPA) stipulate their own Professional Standards where members are required to adhere to.
  • ASIC Requirements: Accountants who provide financial services or are involved in the provision of financial advice may need to comply with regulations established by the Australian Securities and Investments Commission.
  • Regulatory requirements: Accountants who provide auditing services to Public Companies have to comply with the requirements set forth by s1299B(d) of the Corporations Act 2001, and Tax Agents have to comply with the Tax Agent Services Act 2009.
  • Legal Requirements: In some cases, specific state or territory legislation may impose additional requirements for professional indemnity insurance.
  • Minimum Coverage Amount: Many regulatory bodies and professional organizations specify minimum limit of indemnity amounts for PII. The required coverage amount may vary based on the accountant’s services and client base.
  • Professional Services Coverage: In addition to minimum limit of indemnity coverage required, Accountants will need a PI policy that covers all of the Professional Services they provide to clients.
  • Disclosure Requirements: Accountants may be required to disclose their PI coverage details to clients, professional bodies, and regulatory authorities as part of their compliance obligations.
  • Continuous Monitoring: Accountants are typically required to maintain continuous PII coverage throughout their practice, and they must renew their policies regularly to ensure compliance with regulatory requirements.
  • Penalties for Non-Compliance: Non-compliance with PII requirements can result in penalties, fines, or disciplinary actions by professional bodies or regulatory authorities.

IS YOUR PROFESSIONAL INDEMNITY POLICY COMPLIANT?

CLICK HERE to download our Insurance Requirements Guidelines for Accountants.

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Expertise

Our clients come in all shapes and size, from small boutique tax accountants to some of the largest national networks in Australia. Whether you’re predominantly providing tax accounting services to local SMEs or an authorised audit company providing services to ASX200, we have the capabilities and relationship with key Professional Indemnity insurers to ensure your policy is the right one for your business.

Why KBI?

KBI has a dedicated team that focuses on Professional Indemnity. We provide advice to some of the largest professional service firms in Australia and have our finger on the pulse of all Australian and Lloyds Professional Indemnity insurers. As experts in this area of insurance, we work closely with your management and board to understand your unique needs. We then approach insurance companies on your behalf, getting a range of coverage and pricing options. Next, we compare these options and present them in an easy to read comparison with our recommendations to you to help you make an informed decision. Finally, we secure the insurance that you select and review it with you when required, depending on the growth and changes applicable to your organisation.

Professional Indemnity Insurance Team

Account Manager
travis kenzle kbi
Managing Director
nick george
Director
tyler speers kbi
Account Manager

Professional Indemnity Insurers

Contact Info

Street Address:

Level 18, 140 St. Georges Terrace, Perth, WA, 6000

Postal Address:

PO Box Z5102, St. Georges Terrace, Perth WA 6831

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