Professional indemnity insurance
Content Summary
Public accountants
Professional indemnity insurance
If you provide public accounting services in Australia or New Zealand then you need to hold professional indemnity insurance (PII) that contains specific features.
The minimum professional indemnity insurance requirements under CPA Australia's By-Law 9.8 are:
- the minimum sum insured must be the greater of:
- for members in Australia:
- If the Member is in an Approved Practice Entity with practice fee income for the prior year of less than $10 million:
- For Australian-based Members not providing audit, assurance services: $2 million
- For Australian-based Members providing audit, assurance services: $2 million
- If the Member is in an Approved Practice Entity with practice fee income for the prior year of between $10m- $20m:
- For Australian-based Members not providing audit, assurance services: $10 million
- For Australian-based Members providing audit, assurance services: $10 million
- If the Member is in an Approved Practice Entity with practice fee income for the prior year of more than $20m:
- For Australian-based Members not providing audit, assurance services: $20 million
- For Australian-based Members providing audit, assurance services: $75 million
- If the Member is in an Approved Practice Entity with practice fee income for the prior year of less than $10 million:
- NZ$1 million for members in New Zealand with an insurer licensed by the Reserve Bank of New Zealand (the minimum coverage may be more depending upon the services provided and the practice fee income level of the Approved Practice Entity in which the member practices);
- any sum from time to time prescribed by a professional standards scheme, or otherwise prescribed adequate cover for compensation claims under any legislative enactment for the provision of a particular Public Account Services activity having effect in the Division which a Member is attached; and
- any sum from time to time prescribed by the Board either generally or in any particular instance.
- for members in Australia:
(By-Law 9.8(c)(i))
- the insured must be the relevant Member, any Approved Practice Entity with which the Member is Affiliated, all employees of the Member, all directors and officers of any Approved Practice Entity with which the Member is Affiliated, all partners of any Approved Practice Entity with which the Member is Affiliated, all trustees with which the Member is Affiliated, all contractors of the Member who are involved in the provision of Public Accounting Services, all employees of any Approved Practice Entity with which the Member is Affiliated and all contractors of any Approved Practice Entity with which the Member is Affiliated who are involved in the provision of Public Accounting Services (By-Law 9.8(c)(ii)).
The By-Laws also set out other requirements to be met:
- a retroactive date no later than seven years before the beginning of the period of insurance (By-Law 9.8(c)(iv)(A)
- a provision for an excess for each and every claim, not exceeding the greater of 3% of the gross income of the insured in the immediately prior year and 1% of the policy limit (By-Law 9.8(c)(iv)(B)
- cover for losses arising out of dishonesty of all employees of the Member, all contractors engaged by the Member who are directly involved in the provision of Public Accounting Services by the relevant Approved Practice Entity, all employees of any Approved Practice Entity with which a Member is Affiliated, all contractors engaged by any Approved Practice Entity with which the Member is Affiliated who are directly involved in the provision of Public Accounting Services by the relevant Approved Practice Entity, and all natural persons (other than the Member themselves) who are Affiliated, partners of, directors and officers of or trustees of any Approved Practice Entity with which a Member is Affiliated. (By-Law 9.8(c)(iv)(C)
- provision for one or more automatic reinstatements following a claim (By-Law 9.8(c)(iv)(D)
- indemnity to any civil liability arising out of, or in any way related to, the provision of public accounting services by the insured. (By-Law 9.8(c)(iv)(E)
- for any policy issued from or after 8 October 2017, cover for defence costs in addition to the minimum limit or the level of cover must be sufficiently increased to no less than 50% of the minimum limit to take into account these costs. (By-Law 9.8(c)(iv)(F)
- after a Member ceases to provide Public Accounting Services, or ceases to practice, or retires, or the Member’s Approved Practice Entity merges with another entity, the Member must ensure they maintain a policy of professional indemnity insurance for a period of not less than seven years where the Member’s liability for the provision of Public Accounting Services previously provided will not be covered by a future policy (By-Law 9.8(d).
Public Practice Certificate holders are required to update details of their professional indemnity insurance annually in their member account.
A Member who is required to hold a current professional indemnity insurance policy under the By-Laws must provide CPA Australia with:
- unless otherwise not required by CPA Australia, an original certificate of currency of such insurance policy or such other evidentiary document approved by the Board;
- notification of any cancellation, lapse, or failure to renew such insurance policy within 10 Business Days of that event;
- an authorisation (remaining current as a continuing requirement) in such form as CPA Australia may from time to time require the relevant insurer to provide to any officer of CPA Australia, information upon request relating to the identity of the assured, currency, sums insured and terms of such insurance policy; and
- such further details and in such form as may be required by CPA Australia from time to time.
(By-Law 9.8(e))
To be eligible to participate in the CPA Australia Professional Standards Scheme, members must have adequate professional indemnity insurance.
Approved insurance policies
A number of professional indemnity insurance products currently available may not satisfy CPA Australia’s By-Laws or your own practice requirements. Every policy on the market is different. You need to compare each policy and ensure that you are purchasing the right cover for their specific requirements. We recommend that you clarify all coverage and indemnity limit issues with your insurer or insurance broker.
We do not prefer or endorse any supplier or product. You remain at liberty to seek your professional indemnity insurance cover with whomever you wish provided the requirements set out in the By-Laws are met.
Over the years we have identified providers we have worked with who can provide a policy that meet requirements under the By-Laws . Presently we are partnered with Marsh who can provide a PII solution for our members which meets all our By-Law 9.8 requirements and will work with CPA Australia to help achieve our desired outcomes being pricing stability and strong risk management education to our members in public practice.
You can read the details below.
Marsh Insurance for Small and Medium Businesses for members in Australia.
Private and honorary accounting services
Professional indemnity insurance
If you provide private and honorary accounting services in your own name, you’re located in Australia and provide public accounting services, and earn less than $10,000 gross annual income, then you may be entitled to apply for the CPA Australia Mini Policy.
All members for community, voluntary and pro-bono accounting services
Pro-Bono professional indemnity insurance
If you are a member providing voluntary accounting services to the community your membership includes access to the CPA Australia Global PII Policy, which means that you can confidently provide non-paid accounting services to local community organisations with peace of mind that you’re covered.
Chubb Elite Excess Professional Indemnity Insurance Policy
The Chubb Elite Excess Professional Indemnity Insurance Policy (Run-Off Policy) started on 23 December 2019. Run-off cover is a type of liability insurance that provides cover for work done by a business in the past.
This policy may boost eligible public practitioner's professional indemnity insurance for public accounting services by between $2-5 million for causes of action arising from the Scheme Gap Period up to an aggregate limit of $25 million for the Period of Insurance.
The Run-Off Policy covers PAS conducted during the course of your business, but excludes the following:
- computer consultancy or management consulting activities unless services are ancillary to other PAS
- auditing, merger, acquisitions and business valuations of publicly listed companies
- insurance agency
- superannuation fund management/trusteeship
- sealing in securities
- financial product and investment advice, except for:
- SMSF Services including applying for, acquiring, varying, issuing or disposing of an SMSF interest
- SMSF establishment, contributions or pensions
- class of product advice including superannuation products, securities, simple managed investment schemes, general insurance products, life risk insurance products and basic deposit products described in the Corporations Regulations 2001 (Cth) at s.7.6.1BA(3), 7.6.04(3), 7.8.12A(4) and 7.8.14B(3).
State or territory | Period of insurance | Scheme gap period |
---|---|---|
NSW | 15 October 2019 to 15 October 2024 | 8 October 2017 to 23 December 2017 |
WA | 15 October 2019 to 15 October 2024 | 8 October 2017 to 30 December 2017 |
QLD | 15 October 2019 to 15 October 2024 | 8 October 2017 to 1 January 2018 |
ACT | 15 October 2019 to 15 October 2024 | 8 October 2017 to 1 January 2018 |
NT | 15 October 2019 to 15 October 2024 | 8 October 2017 to 18 January 2018 |
SA | 15 October 2019 to 15 October 2024 | 8 October 2017 to 24 January 2018 |
TAS | 15 October 2019 to 15 October 2024 | 8 October 2017 to 21 February 2018 |
VIC | 15 October 2019 to 15 October 2024 | 8 October 2017 to 19 March 2018 |
You should seek your own independent advice with an insurer or broker concerning the above policy
Insurance claims
We are monitoring the insurance market and claims trends to help you manage your risk profile, reduce claims and insurance premiums. So, if you receive a claim against your professional indemnity insurance please advise us by providing details in the Professional indemnity insurance portal. Note, you are required under By-Law 9.8(f) to advise CPA Australia if you receive a claim for or above the minimum sum which you must be insured for under the By-Laws.
Information and resources about Professional indemnity insurance
Reports and reading
Guides, fact sheets and checklists
Our members guide to professional indemnity insurance.
Contacts
CPA Australia
1300 73 73 73
[email protected]
Marsh
Australia:
Ph. 1300 446 960
[email protected]
New Zealand:
Tahlia Rogers-Brown | Client Executive – Affinity
m: +64 27 476 4625 | e: [email protected]
Shaneel Sharma | Client Executive – Affinity
m: +64 21 630 217 | e: [email protected]
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