PI impacted by profit-driven insurance practices

Mike Taylor

Managing Editor and Publisher

13 January 2026

At the same time as the Government is traversing the Professional Indemnity Insurance regime in the context of the Compensation Scheme of Last Resort (CSLR) a Parliamentary Committee has been told of serious and systemic concerns.

The Australian Consumers Insurance Lobby (ACIL) has told the Parliamentary Joint Committee on Corporations and Financial Services that serious and systemic gaps have arisen when insurers withdraw from a sector or impose broad exclusions.

“ACIL is concerned that insurance risk-selection practices have become so rigidly profit driven that some risks are simply being priced out of existence,” it said.

“While insurers have legitimate commercial considerations, an insurance market cannot function—nor fulfil its societal purpose—if every individual policy must be underwritten at a profit.”

“In circumstances of heightened risk, insurers must share responsibility for ensuring that essential cover remains available and affordable. When insurers retreat from entire classes of risk, the burden shifts unfairly onto small businesses and ultimately to consumers and communities that rely on those services,” the ACIL submission said.

The parliamentary committee is conducting an inquiry into Small Business Insurance and the ACIL submission pointed to problems with PI insurance which are likely to resonate with financial planning licensees.

It noted that Professional Indemnity is written on a claims-made basis, “meaning professionals only have cover if the insurer continues to insure that activity at the time of claim is lodged”.

“When insurers later withdraw from a sector or impose broad exclusions (such as cladding or defect-related work), professionals can unexpectedly lose cover for work performed years earlier, despite having been insured at the time,” the submission said.

“This creates a serious and systemic protection gap for building certifiers, engineers and consultants and undermines confidence in professional standards and consumer protections,” it said.

The ACIL submission then specifically noted that building certifiers and consultants had been unable to secure PI cover for cladding-related risks because insurers had withdrawn or imposed broad exclusions on PI policies.