Placement and advice
Claims that cover was not arranged, was inadequate or was not properly explained.
Insurance Broker Professional Indemnity
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Insurance Broker Professional Indemnity
Professional indemnity for general insurance brokers and authorised reps.
Broker claims are almost always about what was not arranged. A sum insured left at last year's figure, an exclusion not explained, a business interruption indemnity period too short, or a claim not notified in time. The loss is the uninsured portion, and it gets quantified precisely at the worst possible moment for the client.
What is it?
Insurance brokers arrange and service general insurance for retail and wholesale clients under an Australian financial services licence or as an authorised representative. ASIC Regulatory Guide 126 sets the compensation arrangements licensees must hold, brokers are members of AFCA for external dispute resolution, and many subscribe to the Insurance Brokers Code of Practice through NIBA.
What does insurance broker professional indemnity cover?
Claims handling
Exposure from a late notification or a claim that was not pursued properly.
Trust money and fraud
Employee dishonesty and funds handling, generally addressed under a fidelity extension.
What affects the cost?
- Gross written premium placed
- Classes of business and scheme facilities
- Authorised representative numbers
- RG 126 limit requirements
- Claims history
Worth raising on the call
- File notes and a written scope of service are the primary defence in a broker claim.
- Run-off cover follows the licence and matters on sale or wind-up.
- Binder and underwriting agency authorities are rated separately from pure broking.
Claims we are commonly asked about
Sum insured never updated
A commercial building is renewed at a figure set several years earlier, a fire occurs, and average or underinsurance reduces the settlement significantly. The gap between the settlement and the true rebuild cost is what the client claims from the broker.
Notification missed before expiry
A client mentions a circumstance to the broker but it is never notified to the insurer before the claims-made policy expires, and the later claim is declined. The loss is generally the full amount that would otherwise have been payable, which makes these claims severe.
Indemnity period too short
A manufacturer's business interruption cover is arranged with a twelve month indemnity period, the rebuild takes eighteen, and the remaining income is uninsured. The dispute usually turns on what was recommended, what the client chose and what the file records.
Worth confirming in the wording
- Worth confirming whether the acts of your authorised representatives, and any binder or underwriting agency authority you hold, are covered under the same policy.
- Worth confirming how prior acts are treated and whether a continuous cover clause applies if a notification was missed at an earlier renewal.
- Worth confirming whether employee dishonesty and trust account money are contemplated by a fidelity extension or need to be arranged separately.
Common questions
Is professional indemnity mandatory for insurance brokers?
Licensees dealing with retail clients must hold adequate compensation arrangements, and ASIC Regulatory Guide 126 sets out what is expected. Professional indemnity insurance is the way most brokers meet it, alongside AFCA membership for external dispute resolution. Authorised representatives are usually covered under the licensee's policy, so the terms passed down are worth reading.
What limit should a broking business hold?
RG 126 links the minimum to revenue and the client base rather than setting a single figure, and it also addresses reinstatements, defence costs and excess. Because a broker's exposure is the size of the client's uninsured loss rather than the commission earned, limits set purely by income often understate it. Reviewing it against the largest risk you place is the practical test.
Do I need run-off cover if I sell the business?
It is generally a central part of a sale. Claims-made cover only responds while a policy is in force, and broker claims commonly emerge at the point of a client's own loss, which can be years later. Buyers and licensees frequently make run-off a condition of the transaction, and the length required is worth agreeing early.
What does broker professional indemnity cost?
It is rated on the book rather than a set price. Insurers look at gross written premium placed, classes of business and any scheme or facility arrangements, authorised representative numbers, the RG 126 limit required, and claims history. Binder and underwriting agency authorities are generally rated separately to pure broking.
General information only. Cover, limits and exclusions depend on the PDS, TMD, eligibility, underwriting and the policy terms. See professional indemnity insurance for the wider picture.
10 Years Advising Steadfast Network Access Licensed Australian Brokers Australia-Wide
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