Regulations have been amended to extend the professional indemnity (PI) insurance requirements of the repealed Insurance (Agents & Brokers) Act while the Federal Government determines a new method of ensuring brokers have proper levels of PI.

National Insurance Brokers Association consultant John Hanks says when the Financial Services Reform Act (FSRA) was introduced the Government was going to find a way of supervising brokers’ PI. But so far it hasn’t.

The Corporations Amendment Regulations 2005 (No 1) effectively means that brokers continue to be subject to the PI insurance provisions of the old Act until July 1 next year.

The PI insurance requirements indicate that the policy has to be acceptable to ASIC, it has to meet minimum requirements, it has to have an Australian jurisdiction clause and it has to have a non-avoidance clause.

Mr Hanks says the industry does not know what the requirements will be from July 1 next year but the “legal requirements are more likely to be lowered than increased”.

“At this stage it seems that the legal requirement will only require coverage for retail clients. In the future brokers may have to make commercial decisions as to how much PI insurance they carry rather than meeting the minimum legislative requirement,” he said.