How Much Does Professional Indemnity Insurance Cost for Accountants in Australia?
In short: there is no set price for professional indemnity insurance for accountants in Australia. Each premium is underwritten on the practice, and the main drivers are fee income, the services you provide, the limit and excess you choose, and your claims history. The TPB, CPA Australia and CA ANZ each set minimum cover, and the highest applicable minimum is the one that binds you.
Key takeaways
• PI premiums are priced on the practice, not the profession, so two firms with the same turnover can pay very different amounts.
• Seven factors move the price: fee income, services, limit of indemnity, excess, claims history, retroactive date and risk controls.
• The TPB minimum for tax and BAS agents is $250,000, $500,000 or $1,000,000 depending on turnover, with the excess capped at 4 per cent of turnover.
• CPA Australia and CA ANZ minimums scale with fees and services and usually exceed the TPB figure.
• An accurate quote needs fee income, a service breakdown, the current schedule and five years of claims history.
It is the first question most accountants ask a broker, and the one that gets the vaguest answer. There is no rate card for professional indemnity insurance. Two practices with the same turnover can pay very different premiums, and the difference usually comes down to a handful of factors that you can see coming if you know what to look for.
This article walks through what actually sets the price, what your professional body and the Tax Practitioners Board require as a minimum, and where accountants tend to either overpay or under-insure.
Why is there no set price for PI insurance?
Professional indemnity insurance is underwritten on the practice, not the profession. An insurer is pricing the likelihood that a client will make a claim against you, and how expensive that claim could be to defend and settle. Every practice presents that risk differently, so every premium is built from the ground up.
That is inconvenient if you want a quick number. It is also the reason a specialist broker can make a real difference: if the insurer understands your practice properly, it prices your risk rather than a generic one.
What moves a PI insurance premium?
In roughly the order insurers weigh them:
1. Fee income. This is the base figure. Higher fees mean more clients, more advice and more exposure, and most minimum cover requirements scale with it.
2. The services you provide. Compliance work for small business is priced differently from audit, SMSF, valuations, litigation support or anything close to financial advice. Adding a new service line without telling your insurer is one of the most common ways cover fails at claim time.
3. The limit of indemnity. A higher limit costs more, though usually not in a straight line. The step from the minimum to the next level up is often smaller than people expect.
4. The excess. A higher excess lowers the premium, but there are caps on how high it can go (more on that below), and an excess you cannot comfortably pay is not a saving.
5. Claims and circumstances history. Not just paid claims. Notified circumstances that never became claims still form part of the picture.
6. Time in practice and the retroactive date. Cover for work done in earlier years has to be carried forward. A long continuous history without gaps is a positive signal.
7. Risk controls. Engagement letters on every job, documented review processes and reasonable cyber security all show an insurer that claims are less likely and easier to defend.
What is the minimum PI cover for accountants?
The floor is set by whoever regulates you, and for most accountants that is more than one body.
If you are a registered tax agent or BAS agent, the Tax Practitioners Board sets minimum cover by turnover. As published on the TPB website, the minimums are $250,000 for turnover up to $75,000, $500,000 for turnover between $75,001 and $500,000, and $1,000,000 for turnover over $500,000. Those amounts include legal and defence costs. The TPB also caps the excess at 4 per cent of turnover, or $1,000 where 4 per cent of turnover is less than $1,000, and requires retroactive cover back to the start of your first continuous policy.
If you hold a CPA Australia public practice certificate, By-Law 9.8 sets a minimum sum insured that scales with the type of services you provide and the fees you earn. CPA Australia also requires members to maintain cover for at least seven years after ceasing to provide public accounting services, and sets limits on the excess and on how much of the limit can be consumed by defence costs.
CA ANZ takes a similar approach for Certificate of Public Practice holders: the level of cover you need depends on the size of your practice and the nature of the services you provide, with the detail set out in the Australian Regulations.
Two practical points follow from this. First, the highest applicable minimum is the one that binds you, and it is often not the TPB figure. Second, these requirements are reviewed from time to time, so confirm the current wording with your body before renewal rather than relying on what applied last year.
Where do accountants overpay for PI?
• Renewing without re-quoting. A policy that was well priced three years ago may not be now. The market moves and so does your practice.
• Using a generalist broker or a comparison site. Accountants are a specialist risk, and a policy priced for a generic professional services firm can carry exclusions that do not fit the work you do.
• Buying add-ons separately that could be arranged together. Cyber cover, business insurance and tax audit insurance are often easier to manage, and sometimes cheaper, when they sit with the same broker as your PI.
Where do accountants under-insure?
• Buying the regulatory minimum and stopping there. The minimum is designed to protect the public, not to protect your practice from a large claim.
• Not disclosing new services. SMSF administration, bookkeeping for a client's other entities, or a one-off valuation can all sit outside what your insurer thinks you do.
• Setting an excess to lower the premium without checking the regulatory cap or your own cash position.
• Forgetting that defence costs may be inside the limit. On a TPB-compliant minimum policy, the cost of defending a claim comes out of the same pool as any settlement.
How do you get an accurate PI quote?
The quality of the quote depends on the quality of the information. Before you ask for a price, have the following ready:
• Fee income for the last financial year and your estimate for this one
• A breakdown of services by share of fees, including anything new
• Your current policy schedule, including the retroactive date and any endorsements
• Your claims and circumstances history for the past five years or more
• The professional bodies and registrations you hold
With that in hand, a specialist broker can tell you quickly whether your current cover is priced fairly, whether the limit is right for your practice, and whether there are gaps worth closing before renewal.
Frequently asked questions
How much does professional indemnity insurance cost for an accountant?
There is no fixed price. Insurers underwrite each practice on fee income, the services it provides, the limit and excess chosen, and its claims history. A specialist broker can price your practice in a few days once you supply those details.
What is the minimum PI cover for a registered tax agent?
The Tax Practitioners Board sets minimums by turnover: $250,000 for turnover up to $75,000, $500,000 for $75,001 to $500,000, and $1,000,000 above $500,000, inclusive of legal and defence costs. Your professional body may require more.
Does a higher excess lower the PI premium?
Usually, yes, but the TPB caps the excess at 4 per cent of turnover (or $1,000 where that is less), and an excess you could not pay at claim time is not a saving.
Do I have to tell my insurer when I add a new service?
Yes. Services not disclosed at inception or renewal may not be covered. SMSF administration, valuations and bookkeeping for a client's other entities are common examples.
Next step
Abacus Australia has arranged professional indemnity insurance for accountants for more than three decades, and a quote costs nothing. Send us your details through the Get a Quote page, or read more about how our professional indemnity insurance for accountants is structured.
