ASIC Considers Action as Professional Indemnity Insurance Transparency Falls Short
ASIC Considers Action as Professional Indemnity Insurance Transparency Falls Short
The market study revealed two primary issues: the lack of transparency in PI coverage and the extended durations required for claims resolution. In response, ASIC is exploring potential measures to address these challenges. Jared Timms, a partner at Howden Broking, emphasized the critical role of brokers in ensuring comprehensive communication with underwriters about the client's services. Timms advised against focusing solely on policy cost, noting that working with local carriers might streamline claims handling.
Since 2020, ASIC has observed a notable decline in the number of AFSLs experiencing PI-related compliance issues, including a decrease in AFSLs seeking waivers for PI requirements. The review also discovered market enhancements such as increased supply, competitive dynamics, premium reductions, and a return to profitability, signifying a recovery since the Hayne Royal Commission-induced exodus in 2019.
Despite these improvements, a Financial Services Council green paper recently critiqued ASIC's oversight on AFSL PI coverage.
The finality of PI claims and the ambiguity surrounding insurance coverage are pivotal issues for the financial services sector. Inadequate PI insurance can leave AFSLs and their clients vulnerable to financial risk, undermining trust in the financial advice industry. For consumers, clear and reliable PI coverage ensures accountability and protection, whereas for AFSLs, it represents a safeguard against claims-related financial duress.
Looking forward, ASIC's initiatives to enhance transparency and oversight, alongside evolving PI insurance market conditions, could herald substantial changes in the regulatory landscape. Expert commentary implies that aligning PI policies with client needs will remain crucial. Concurrently, the introduction of an updated Financial Advisers Register data set, from 15 August 2025, signals a strengthened compliance framework, demanding accuracy in recording adviser qualifications and pathways.
AFSLs are now mandated to update ASIC on any discrepancies within 30 business days to sidestep penalties. ASIC's spot checks have highlighted inaccuracies in the registration of financial advisers, leading to warnings and reprimands. Such compliance measures aim to uphold the regulatory integrity of AFSL operations.
Published:Tuesday, 12th Aug 2025
Source: Paige Estritori
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A legal principle that stipulates that insurance policies should restore the insured to the financial position they were in before the loss.