Professional indemnity insurance

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) for a policy include:

• the minimum sum insured must be the greater of:
  • for Australian based members, range between $2 million and $75 million depending on the type of services provided and the fees earned by the Member or their Approved Practice Entity. However, these minimums may be increased by a legislative enactment including one for a professional standards scheme or the Board prescribing a higher minimum in a particular instance. As always you should speak to your insurer or broker to satisfy yourself you have the right insurance for your business.
  • 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.

(By-Law 9.8(c)(i))

Further:

• 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)).
• in Australia, an insured must hold a policy of professional indemnity insurance underwritten by a general insurer or insurers authorised by APRA in the  Register of General Insurers or the Register of Authorised Non-Operating Holding Companies; 
• in New Zealand, an insured must hold a policy of professional indemnity insurance underwritten by a general insurer or insurers licensed by the Reserve Bank of New Zealand and contained in the Register of Licensed Insurers.

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:

1. 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;
2. notification of any cancellation, lapse, or failure to renew such insurance policy within 10 Business Days of that event;
3. 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
4. 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.

In addition to the requirements above, it is best practice for the policy to:

• be a ‘claims made’ or ‘claims made and notified’ policy and not an ‘occurrence’ based policy.    
• have a continuous cover extension.
• contain an aggregation clause which provides that, for the purposes of calculating the number of excesses payable:
  • all causally connected or interrelated acts, errors or omissions shall jointly constitute a single act, error, or omission under this Policy; and
  • where a single act, error, or omission gives rise to more than one claim, all such claim(s) shall jointly constitute one claim. 
• where preferable, be a single policy which complies with these Insurance standards

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.

Marsh Insurance for New Zealand 

Contacts

CPA Australia
1300 73 73 73
[email protected]

Marsh
Australia:
Ph. 1300 446 960
[email protected]
Marsh website

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]