Professional indemnity insurance (PII) is one of the most complex and topical issues affecting the accounting profession and financial services industry. Therefore, it is important to ensure that you know what you are being covered for.
CPA Australia, in conjunction with QBE Insurance (Australia) Ltd and Fenton Green & co, amended the CPA Australia Professional Indemnity Insurance Policy for members in Australia to meet ASIC’s requirements for PII for the Limited AFS licence, as set out in ASIC Regulation 126.
The CPA Australia PII Policy is designed for those members who provide a public accounting service. This policy is available for those who are in public practice and who apply for, and are granted, a Limited AFS licence.
The CPA Australia PII Policy meets ASIC’s requirements for the Limited AFS licence. This means that you do not require a separate policy to cover your insurance needs under the Limited AFS licence.
As per ASIC’s Regulatory Guideline there are a number of conditions that need to be met:
- minimum sum insured of $2,000,000, plus costs
- the policy must reflect a condition in the settlement clause that they recognise an ASIC-approved External Dispute Resolution Scheme (EDR)
- the policy terms and condition are adequate to meet the risk profile of the practice
- the excess is of a reasonable quantum that can be met by the practice.
An EDR is in essence, a compulsory mediation process. In 2018, the Australian Financial Complaints Authority was launched as an amalgamation of the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.
How PII works
You are not required to have your PII in place before applying to ASIC for a limited licence. If ASIC decide to grant your application they will issue you a draft licence subject to conditions which will include holding appropriate PII. On accepting the draft licence you can send ASIC evidence of holding PII at this time. We would encourage you to talk to Fenton Green before lodging your application to get an understanding of timing, costs, etc. that will apply to your circumstances.
The CPA Australia PII Policy for public practitioners covers practitioners that hold a Limited AFS licence. It also extends to members operating under someone else’s licence as an authorised representative. Members acting as authorised representatives should refer to their licensee to clarify their PII requirements.
Members insured outside of the CPA Australia PII Policy will need to directly negotiate with their insurer to ensure that their PII policy meets ASIC requirements.
Applying for a limited licence
CPA Australia has a range of resources to guide you on applying for a Limited AFS licence and the training requirements.
Broader financial planning advice insurance
Since the CPA Australia Professional Indemnity Insurance Policy was not designed to meet the conditions of ASIC RG126 Compensation and insurance arrangements for AFS licensees, members who are financial advisers need to arrange PII cover outside of the Policy for these activities.
ASIC's regulation took effect for the existing businesses of financial advisers from 1 July 2008. New businesses have been required to apply the conditions of RG 126 since 1 January 2008.
Members offering financial planning advice services as an authorised representative of a licence holder are likely to be covered by the licensee's PII policy.
CPA Australia's PII Policy preferred broker, Fenton Green, can assist financial advisers with their specific insurance needs
Terms and conditions
The products and services are underwritten and issued by QBE Insurance (Australia) Limited ABN 78 003 191 035 (AFSL 239545) (QBE) through its broker, Fenton Green Insurance Services Pty Ltd (Fenton Green). CPA Australia is solely a mere referrer of the products and services. CPA Australia makes no warranty as to the accuracy or completeness of any information contained on this webpage and/or fact sheet, nor does CPA Australia accept responsibility for any acts or omissions in reliance upon any such information. Before acting on such information, consider the appropriateness of the products and services that are promoted having regard to your objectives, financial situation and needs. Independent professional advice should be sought with respect to the product(s) and service(s) and any information referred to on the webpage and/or fact sheet. To the extent permitted by applicable law, CPA Australia, its employees, agents and consultants exclude all liability for any loss or damage claims and expenses including but not limited to legal costs, indirect special or consequential loss or damage (including but not limited to, negligence) arising out of or related to: (a) information contained on the Landing Pages; (b) Third Party Information; and/or (c) the products and services offered by any Partner. As a 'mere referrer', CPA Australia may receive revenue from QBE.