It is wonderful news that the AIBS have successfully secured the approval of the Professional Standards Councils throughout Australia to establish its own Professional Standards Scheme (PSS).
The AIBS has yet again demonstrated it is the leading force in your profession in securing this approval.
In this article we address various aspects of the PSS and how they impact upon the professional indemnity insurance landscape.
The insurance industry broadly supports the establishment of Professional Standards Schemes.
The main aspects that appeal to insurers are:
We know that the establishment of the PSS will raise a few questions and in anticipation of those we address the following:
Yes. Underpinning the PSS is that your clients are provided with a mechanism that will compensate them for your errors. This mechanism is your PI policy.
In many State and Territory jurisdictions it is also a legal obligation for you to maintain PI.
No. The AIBS is not an insurance broker and cannot arrange for the purchase of PI. This is still done by a specialist PI broker. The AIBS recommend BRIC as we have the expertise, market access and experience to manage your PI appropriately. Many general insurance brokers do not.
Yes. However, it will take several years to come down. You will not see any reduction in your premium immediately because of the PSS. The establishment of the PSS is the first step in a long path to improve the risk profile of your profession. Without taking this first step your PI premiums will just keep rising.
PI is long tail liability insurance. The policy you hold today provides cover for claims arising out of work you performed 1, 3, 5, 7 or 10 years ago. The PSS only begins to cap the liability of your work that you perform after it commences on1st July 2021.
The PSS caps liability at a maximum of $2,000,000. Most historic PI claims are less than this and so insurers are still going to be paying out the same level of typical claims that existed without a PSS. What will happen is those rare very large claims should now be capped which, over time, will improve the historical performance of claims from your profession and help reduce premiums.
The PSS will apply the liability cap against claims for property damage and financial loss. It will not apply any cap to any claim that involves personal injury. Therefore, you will still need to maintain an appropriate level of insurance to ensure you adequately protect your own financial assets from personal injury claims. Your limit may also be influenced by your local jurisdiction and what statutory level of insurance cover you are obliged to purchase.
Because PI is retrospective in its nature, you must consider the liability that you have created in past years to identify what a suitable level of cover is required on your policy in the future.
No. The PSS has a mandatory scope of cover that is required. If your PI does not respond to a claim, your liability cap will not apply. Therefore, there are certain aspects of the policy that must comply with the requirements of the PSS. Be very careful about this as many general insurance brokers do not understand the specific nuances in each policy that may result in your PI not complying and you no longer having the liability cap.
The PSS is an excellent first step in reducing the risk profile of the Building Surveying profession. Without this it is almost certain that PI premiums will continue to rise. BRIC applaud and congratulate the Executive Team and Board of the AIBS in securing this important milestone in your profession.
To the extent that any of the above content constitutes advice, it is general advice without reference to your needs or objectives and therefore cannot be relied upon. Before acting on the above information you should obtain advice specific to your needs.