Professional indemnity insurance
.... now you're covered
What is professional indemnity insurance?
Anyone can make a mistake, but if a business is found liable for negligence in the advice or services it provides, the costs can be significant, and defending a claim is expensive even when it doesn't succeed.
For engineering firms, this risk usually centres on design work, where a calculation error or design fault can cause significant loss well after a project is finished. Manufacturers and wholesalers carry a related exposure wherever they provide technical specifications or advice alongside a product, which sits outside what product liability cover responds to. More than 3.5 million of Australia's 13.8 million-strong workforce are classified as professionals whose income depends on specialist qualifications or knowledge, and the cost of getting it wrong has grown accordingly — gross written premium for professional indemnity insurance across Australia's APRA-regulated insurers rose 75% between 2015 and 2021, driven by both higher average premiums and a growing number of policies written.
Professional indemnity insurance is designed to meet exactly this exposure, covering the cost of defending a claim and any compensation that follows, whether or not the allegation ultimately holds up.
What's covered by professional indemnity insurance
Professional indemnity policies are usually built around the specific profession or service a business provides, so the exact wording differs by industry and insurer. Your broker can confirm what applies to a specific policy and what else can be added to your cover.
Cover for claims that the business was negligent or careless in the professional services or advice it provided.
Cover for claims arising from inaccurate or misleading advice, statements or opinions given in a professional context.
Cover for defence costs, and certain fines and penalties where insurable by law, arising from a breach of legislation such as Australian Consumer Law.
Cover for the legal costs of defending a claim, regardless of whether the claim against the business succeeds.
Cover for the costs of responding to a formal inquiry or disciplinary proceeding by a professional or regulatory body.
Why you might need professional indemnity insurance
Professional indemnity policy types
Professional indemnity is written on a "claims made" basis, meaning a policy responds to claims made during the period of insurance, rather than to when the conduct itself occurred. Cover can often extend to include a specified retroactive date, so past work remains covered as long as the policy stays in place.
Professional indemnity key considerations
Because cover is claims-made, it's important to keep a policy running continuously, including arranging run-off cover if the business stops trading or changes structure, or past work can be left unprotected. It's also worth checking how contractors and subcontractors are treated under the policy, and whether cover extends to work carried out overseas. Reviewing this with your broker as the business changes means there's time to close any gaps.
Being right doesn't make the defence free
A design error or a piece of technical advice can cause real financial harm long after the invoice is paid, and a claim doesn't need to succeed for the legal bill to land. Professional indemnity insurance is built to cover exactly that cost — defending the claim as much as any compensation that follows.
Your broker can let you know whether your retroactive date covers all your past work, how contractors and work carried out overseas are treated under the policy, and what happens to cover if the business changes structure or stops trading.
Let's get you covered
