Designed to protect professionals against negligence claims, professional indemnity insurance does not cover fraud, criminal conduct, or systemic failures—categories that account for a significant proportion of claims currently entering the CSLR. Attempting to expand professional indemnity cover to respond to these issues would simply shift the problem from one group to another and add significant costs to premiums without meaningfully addressing the reasons for the CSLR’s significant shortfall.
To put the CSLR on a sustainable footing and better protect consumers, the ICA's submission identifies three priority reforms:
- Greater regulatory oversight of managed investment schemes, which are the primary driver of CSLR claims, including consideration of an ASIC-approved list of products eligible for retail distribution.
- Restricting CSLR compensation to actual capital losses and introducing means testing to direct funds to those most in need.
- Reviewing minimum coverage limits, which have been largely unchanged since 2008, to reflect current market conditions.
The ICA will continue to work with the Government and Treasury on reforms that improve the CSLR’s long-term financial sustainability, including on the design and implementation of proposed reforms.
ICA CEO Andrew Hall stated, "We want to see a CSLR that works for consumers over the long term. That means tackling the underlying causes of claims rather than shifting costs around the system. Professional indemnity insurance is fundamentally the wrong instrument for the problem at hand. Better regulation of high-risk financial products, a more targeted Scheme, and stronger enforcement of existing professional indemnity requirements are the reforms that will make a real difference."
Please Note: If this information affects you or is relevant to your circumstances, seek advice from a licensed professional.
