An investigation by the Australian Securities & Investments Commission (ASIC) into professional indemnity (PI) insurance has found that most small companies holding Australian financial services (AFS) licenses had PI insurance that comply with regulatory requirements.

“We found, generally, the small AFS licensees that we reviewed had policies with an overall indemnity limit that complied with requirements,” the corporate watchdog said in a statement.

The review involved 56 small AFS licensees, and focused on the adequacy of cover for defence (legal) costs, and fraud and dishonesty, in the policies offered to them by two insurance companies.

The review was made following an ASIC report, which identified that small advice licensees pose the highest risk of having inadequate PI insurance, particularly inadequate costs cover as well as fraud and dishonesty cover.

The regulator found that only three licensees did not have PI insurance in line with their obligations. ASIC's intervention, however, has led these licencees to obtain improved PI insurance, or begin the process of doing so.

ASIC also worked with the two insurance companies to help them enhance their standard policy terms to ensure that their fraud and dishonesty cover allows insurance licencees to be compliant with Regulatory Guide 126: Compensation and insurance arrangements for AFS licensees.


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