Professional indemnity insurance for Australian businesses and professionals
Professional advice, services or representations can be challenged even when work is performed in good faith. RMA Insurance Brokers helps businesses review and arrange professional indemnity insurance around the services they provide and the exposures those services create.
Professional indemnity insurance at a glance
Professional indemnity insurance is designed to respond to certain claims alleging that professional advice, services, acts, errors or omissions have caused another party financial loss.
Its primary purpose is generally to provide cover for liability arising from a breach of professional duty. Depending on the policy, cover may also include defence costs, regulatory inquiry costs and other extensions.
Key areas
- Professional negligence
- Errors and omissions
- Breach of professional duty
- Defence costs
- Regulatory inquiries
- Claims-made protection
Who should consider professional indemnity insurance?
Professional indemnity insurance is relevant to businesses and individuals whose clients rely on their professional knowledge, advice or services.
- Consultants and professional advisers
- Accountants and financial-services professionals
- Property professionals, valuers and Livestock & Property Agents
- Architects, engineers and design professionals
- IT, technology and digital consultants
- Other businesses providing specialist advice or services for a fee
Professional indemnity insurance may also be required by legislation, a regulator, professional registration arrangements or a client contract. Requirements vary by occupation and jurisdiction.
For Livestock & Property Agents, our Insight on professional indemnity versus public liability explains why the two policies address different types of allegations. rma network Members can also review the Network professional indemnity page for Livestock & Property Agents.
What can professional indemnity insurance cover?
Professional indemnity policies vary between insurers and professions. Depending on the policy arranged and the circumstances of a claim, cover may include some of the following.
Professional negligence
Cover may respond to claims alleging negligence in the provision of professional advice or services. The claim does not necessarily need to establish that the professional deliberately did anything wrong.
An alleged failure to exercise the expected standard of professional care may be enough to create a claim requiring defence.
Errors & omissions
Professional work can involve mistakes, omissions or information that later proves incomplete or incorrect.
Depending on the policy, professional indemnity may respond where an act, error or omission in professional services is alleged to have caused a client financial loss.
Misstatements & breach of professional duty
A client may allege that advice, representations or professional information were inaccurate, misleading or failed to meet the professional duty owed.
Defence costs
Professional claims can require legal representation even where the allegation is ultimately unsuccessful.
Depending on the wording, the policy may pay eligible costs incurred defending a claim covered by the insurance.
Depending on the wording, defence costs may be within the policy limit or payable in addition to it. Where costs fall within the limit, they can reduce the amount remaining for an insured settlement or damages.
Regulatory inquiry costs
Professional conduct can also become the subject of a regulator, registration body or other formal inquiry.
Some professional indemnity policies may cover eligible costs associated with responding to or defending certain inquiries into the insured’s professional conduct.
Selected policy extensions
Professional indemnity wordings can contain additional extensions depending on the insurer and profession. These may include matters such as fraud or dishonesty by employees, defamation, loss of documents, privacy issues, contractors or consultants and certain investigation costs.
These extensions should not be assumed to apply. Their availability, limits and exclusions vary between policies.
Claims-made and notified: timing matters
Professional indemnity insurance is commonly written on a claims-made and notified basis.
This is different from many property or motor policies.
In broad terms, the relevant professional indemnity policy is generally the policy in force when a claim is first made against the insured and notified to the insurer, subject to the wording.
That means three dates can become particularly important:
- when the underlying professional work occurred
- when the insured first became aware of a claim or circumstance that might lead to a claim
- when the matter was notified to the insurer
If you become aware of facts that might give rise to a claim, notifying the insurer in writing as soon as reasonably practicable and before the policy expires can be important. Under Australian law, timely written notification of those facts may preserve cover for a claim made later, subject to the applicable circumstances.
A policy may also contain a retroactive date. Work performed before that date may fall outside the available cover.
This is why continuity of professional indemnity cover can matter even where a business changes insurer, stops providing a particular service, is sold or ceases trading.
Our guide to run-off cover when buying or selling a business explains why historical professional work may still need protection after ownership or operations change.
Your professional services need to be described accurately
Professional indemnity insurance is arranged around the professional services disclosed to the insurer.
A business can therefore create an insurance issue if its activities expand but its professional indemnity policy continues to describe only the services it provided several years earlier.
Areas worth considering include:
- all advice and professional services provided
- new services introduced during the year
- professional reports, valuations or representations
- qualifications and professional registrations
- work performed by employees
- contractors and consultants
- services provided outside Australia
- client contracts
- previous professional services
- changes to the legal entity providing the service
RMA Insurance Brokers can help review whether the activities shown on the policy still reflect how the business operates today.
How professional indemnity differs from public liability
Professional indemnity and public liability can both involve a third party making a claim, but they are designed for different exposures.
Professional indemnity generally deals with allegations arising from professional advice, services or conduct that cause financial loss.
Public liability generally deals with allegations involving third-party personal injury or property damage arising from business activities.
For example, an allegation that incorrect professional advice caused a client financial loss may involve professional indemnity.
A customer slipping and being injured at the business premises would generally be considered under Liability Insurance instead.
The exact policy response depends on the circumstances and wording, and some incidents can involve both types of insurance.
What information may be needed for a professional indemnity review?
When reviewing professional indemnity insurance, we may need information about:
- the profession and services provided
- annual revenue or professional fees
- professional staff, qualifications and registrations
- major client types and larger assignments
- contractors or consultants
- overseas work or clients
- contractual insurance requirements
- current limit, excess and retroactive date
- claims, circumstances and previous professional indemnity history
Different professions can require considerably different underwriting information.
When should professional indemnity insurance be reviewed?
A review is particularly worthwhile when the business has:
- introduced new professional services
- changed the way advice is provided
- taken on larger clients or contracts
- increased professional fees or revenue
- begun operating in another jurisdiction
- engaged additional contractors or consultants
- changed legal entities
- merged with or acquired another business
- become aware of a complaint or circumstance that may lead to a claim
- received new contractual or regulatory insurance requirements
Annual renewal is also an opportunity to confirm that the professional services description, retroactive date, policy limit and claims history remain correct.
What may not be covered?
Professional indemnity policies contain exclusions, conditions, excesses and limits.
Depending on the policy, cover may not respond to:
- commercial liabilities unrelated to professional duty
- unpaid professional fees
- pollution
- known claims or circumstances arising before the relevant policy period
- professional work performed before an applicable retroactive date
- liabilities assumed under contract beyond the professional liability otherwise owed
- deliberate fraudulent, criminal or dishonest conduct by an insured
- activities or professional services not disclosed to the insurer
Some policies may provide limited extensions for employee dishonesty or fidelity losses, depending on the wording.
This is not a complete list.
The relevant policy wording, schedule, endorsements and circumstances of the claim determine how the insurance responds.
Example: an error in a professional report leads to a claim
Illustrative example
A regional professional business prepares a report for a client as part of a commercial transaction. After the transaction is completed, the client alleges that an important error in the report caused them a financial loss.
The professional disputes the allegation but receives a formal demand for compensation. Legal advice is required to review the work, respond to the allegations and defend the business’s position.
The matter is notified under the professional indemnity policy. Depending on the wording, timing, professional services insured and circumstances of the claim, the policy may respond to eligible defence costs and any covered settlement or damages.
Example provided for general illustration only. Cover depends on the insurer, policy wording, professional services, retroactive date, limits, exclusions and circumstances of the claim.
For more examples relevant to property and livestock professionals, see common professional indemnity claim scenarios for Livestock & Property Agents.
Professional indemnity insurance across Australia
RMA Insurance Brokers assists professionals and businesses across rural, regional and metropolitan Australia.
We work with professional services businesses, consultants and regional businesses whose advice, representations or specialist services can create professional liability exposures.
We also work closely with rma network Livestock & Property Agents, providing strong connections with professional businesses throughout regional Australia.
Our services are not limited to rma network Members. Professionals and businesses across Australia can contact RMA Insurance Brokers for professional indemnity assistance.
Why RMA Insurance Brokers?
Professional indemnity insurance can be particularly sensitive to wording and continuity.
The policy needs to reflect not only what the business calls itself, but the professional services it genuinely performs and the exposures those services create.
RMA Insurance Brokers can help you:
- review the professional services being provided
- consider appropriate policy limits and excesses
- review contractual insurance requirements
- check the named insured entities
- review retroactive dates and continuity
- compare available policy wordings and extensions
- assist with notifications and professional indemnity claims
Our focus is on understanding the professional work being performed and helping arrange insurance that reflects that work.
Frequently asked questions
What does professional indemnity insurance cover?
Professional indemnity insurance may cover certain claims alleging negligence, errors, omissions, negligent misstatements or breaches of professional duty arising from professional advice or services.
Depending on the policy, it may also cover eligible defence costs, investigation or inquiry costs and selected extensions.
Is professional indemnity insurance mandatory?
It is mandatory or required under some professional, licensing or regulatory arrangements, while other businesses may be required to hold it under a client contract or professional-body requirement.
Requirements depend on the profession and jurisdiction and should be checked for the particular business.
What is the difference between professional indemnity and public liability?
Professional indemnity generally concerns allegations arising from professional advice, services or conduct.
Public liability generally concerns third-party personal injury or property damage arising from business activities.
A business may need both because they address different exposures.
What does claims-made and notified mean?
A claims-made and notified policy generally requires a claim to be first made against the insured and notified to the insurer during the applicable period of insurance, subject to the policy wording.
The timing of a circumstance, claim and notification can therefore be important.
How much professional indemnity cover do I need?
There is no single limit suitable for every business.
The appropriate limit may depend on the profession, size of engagements, potential client losses, regulatory or professional requirements and contractual obligations.
RMA Insurance Brokers can help review the required limit against the business and available insurance market.
Related insurance
Liability Insurance
Public and products liability insurance for third-party injury and property damage exposures.
Management Liability Insurance
Insurance considerations for directors, officers and businesses facing management-related claims and statutory exposures.
Cyber Insurance
Insurance considerations for cyber incidents, data breaches, business interruption and incident-response costs.
Business Insurance
Broader insurance for business property, interruption, theft, equipment and other commercial risks.
Claims Support
RMA Insurance Brokers support for businesses managing insurance claims and insurer communications.
Construction & Contract Works Insurance
Insurance considerations for residential, commercial and rural projects, works in progress and associated liability exposures.
Review your professional indemnity insurance
Professional services, clients and contractual requirements can change over time.
Whether you are arranging professional indemnity for the first time, reviewing an existing policy or checking whether the cover still reflects the services you provide, RMA Insurance Brokers can assist.
The information on this page is general information only and does not take into account your objectives, financial situation or needs. Cover is subject to the terms, conditions, limits and exclusions of the relevant policy. Insurance products and available cover vary between insurers. Please review the relevant policy documentation and obtain advice appropriate to your circumstances before making a decision.