Choose mortgage broker professional indemnity insurance by matching the cover limit, exclusions, excess and policy dates to your work. If you work under another licensee, first establish whether its policy covers your authorised activities.
Credit licensees outside Australian Prudential Regulation Authority (APRA) regulation must have adequate compensation arrangements. The Australian Securities and Investments Commission (ASIC) explains these in RG 210, Compensation and insurance arrangements for credit licensees. Professional indemnity insurance is the primary way to meet that obligation, although ASIC can approve alternatives.
What PI Insurance Covers for Brokers
Professional indemnity (PI) insurance covers liability from errors, omissions or negligence in your professional services, within the policy terms. Errors and omissions insurance describes the same type of cover.
A covered claim can involve legal defence costs and compensation for a client's financial loss. The wording determines which services and people are insured, along with the exclusions and limits.
Use RG 210 for credit-licensee compensation arrangements. RG 126, Compensation and insurance arrangements for AFS licensees applies to Australian financial services licensees. For the wider obligations that insurance supports, see mortgage broker compliance.
Why Brokers Face These Claims
Claims can arise when a client says your loan recommendation or handling of their application caused financial loss. Examples include a disputed recommendation, misleading advice about loan terms or a documentation error.
For example, a client might allege that an undisclosed loan cost changed the suitability of the recommendation. That allegation requires a response even while the facts remain disputed. Keep the recommendation and supporting records together so the insurer can assess what happened.
A complaint and an insured claim have different processes. See how broker complaints reach the Australian Financial Complaints Authority (AFCA) for the complaint pathway.
Cover for Brokers Working Under a Licensee
Get written confirmation from your licensee or aggregator that its PI arrangements cover your authorised activities. An aggregator relationship alone does not establish which entity or work the policy insures.
Ask the confirmation to identify your business, the activities covered and any conditions requiring separate insurance. Keep it with the certificate of currency and your appointment documents. Review it when you change licensees, alter your appointment or add services.
QBE's PI insurance guide explains why the named legal entity and description of professional services matter. A certificate confirms a policy exists. Read the wording and endorsements to establish the scope.
Claims-Made Cover, Retroactive Dates and Run-Off
Claims-made PI cover generally depends on when a claim is made and notified, subject to the policy wording. The date you gave the advice still matters because the retroactive date limits which earlier work can be covered.
CGIB explains the claims-made and notified basis. A claim received during a current policy can concern work performed earlier, provided the wording and retroactive cover allow it.
Run-off cover addresses claims arising after you cease the insured work. Before changing insurers or ending an appointment, ask the insurer in writing about the retroactive date and run-off arrangements. Establish who covers earlier work, how long reporting remains available and what you must notify before the existing cover ends.
In a hypothetical switch, advice given under the previous insurer leads to a claim under the replacement policy. A later retroactive date could leave that advice outside cover. Obtain the continuity answer before cancelling the old policy.
Policy Types Worth Considering
PI addresses professional-service claims. Cyber and general liability policies address other exposures, so compare them by the event that causes the loss.
- PI responds to covered allegations about your professional advice or services.
- Cyber insurance addresses covered incidents involving systems or client data, such as a data breach.
- General liability addresses covered third-party injury or property damage, such as an injury at your office.
The wording decides how each policy responds when events overlap. Use the broader mortgage broker insurance guide to assess the other policies your brokerage needs.
How to Compare Policies
Compare quotes using the same business information and cover assumptions. Put each insurer's answer beside the same question so a lower premium does not hide a narrower policy.
| Comparison Point | What to Record for Each Quote |
|---|---|
| Limit | The limit per claim and across the policy period. Compare it with annual settled loan volume, possible client losses and aggregator minimums. |
| Defence costs | Whether defence costs reduce the amount available for compensation. |
| Exclusions | Any exclusion affecting your actual services, prior circumstances or the people who perform the work. Ask how fraud and dishonesty provisions affect claims against the licensee. |
| Excess or deductible | What you pay for each claim and whether your cash reserves can meet it. Compare the premium at the same excess. |
| Continuity | The retroactive date, notification requirements and run-off terms. |
Aggregator minimums are one input into the limit. Assess the brokerage's exposure as well. Annual loan volume helps describe the business, but it is not itself a formula for the sum insured.
Buying the Policy in Order
Follow the same buying sequence at renewal as you would for a first policy.
- List your exposures. Record annual settlement volume, staff and representatives, the services you provide and contractual insurance minimums.
- Collect quotes on the same basis. Give each insurer the same description of the business and requested cover.
- Read the wording and endorsements. Resolve exclusions, insured entities and continuity questions in writing before accepting.
- Check the insurer. Review its financial strength and ask the insurance broker how claims are notified and handled.
- Buy the policy and diarise the review. Keep the certificate, wording and written answers together. Set a reminder before renewal leaves too little time to compare.
What PI Insurance Costs
PI insurance is priced by quote against the business and requested cover. A general small-business average does not establish the premium for an Australian mortgage brokerage.
BizCover's PI guide identifies profession, business size, service risk and cover amount as cost factors. Claims history and the excess also affect the quote.
Ask for the annual total including taxes and charges. If you choose instalments, ask for the total payable across all payments. Compare any premium saving against the extra excess or reduced cover you would accept. Use your actual business information to obtain a price you can budget for.
Managing the Policy Long Term
Review PI cover annually and when the brokerage changes. Tell the insurer about new services and follow the policy's notification requirements for claims or circumstances that could lead to one.
Keep advice records, application documents and client communications accessible. Record why you chose the policy limit and retain the insurer's written answers. Staff training and secure handling of client data address risks before a claim arises.
Before renewal, compare last year's settled loan volume with the sum insured and the exposure you assessed when buying the policy. Include changes in staff and services. If the cover no longer matches the business, obtain revised terms before accepting the renewal.
