Switching PI Insurers? Why Your Retroactive Date Matters More Than the Premium

Renewal is when most accountants compare professional indemnity quotes, and the premium is the number everyone looks at first. It is the easiest figure to compare. When you switch insurers, though, the figure that matters more sits further down the policy schedule: the retroactive date.

Get it wrong and a claim about work you did years ago can fall between your old policy and your new one. This article explains how claims made cover works, what the retroactive date does, what your regulators require, and what to check before you move.

Claims made vs occurrence cover, in plain English

Professional indemnity policies are usually written on a claims made and notified basis. As the Tax Practitioners Board explains, this means the claim must be made against you and reported to your insurer during the policy period for the policy to respond.

An occurrence policy works the other way around. It responds to events that happen during the policy period, whenever the claim eventually arrives. Most PI cover for accountants is not written this way, and CPA Australia lists claims made or claims made and notified cover, rather than occurrence cover, as best practice.

The practical result: the policy that responds to a complaint about a return you lodged in 2021 is the one you hold when the client complains, which might be in 2027. Your current policy is carrying all of your past work, not just this year's.

What the retroactive date does

The retroactive date is printed on your policy schedule. The policy covers claims arising from work done on or after that date. Work done before it is outside the cover, even if the claim is made while the policy is in force.

If you have held continuous cover for years, your retroactive date should reach back to the start of that history. That long, unbroken date is part of what you are paying for, and it is the thing most at risk when you change insurers.

What your regulators require

If you are a registered tax or BAS agent, the TPB requires retroactive cover. Your new policy must cover you back to the earlier of the retroactive date in the policy you are renewing, or the start date of your first policy if you have held a series of continuous policies. The TPB also makes clear that you do not have to stay with the same insurer to meet this requirement.

If you hold a CPA Australia public practice certificate, CPA Australia requires a retroactive date no later than seven years before the start of the period of insurance.

CA ANZ and IPA members should check their own body's current requirements as well. Where more than one set of rules applies to you, the strictest one is the one you have to meet.

Where switching goes wrong

•      The new policy starts a fresh retroactive date. If the new schedule shows a retroactive date equal to the new policy start date, earlier work may not be covered. Check the date on the quote, not just the price.

•      There is a gap between policies. The TPB requires you to maintain PI cover for as long as you are registered. Even a short gap between the old policy ending and the new one starting can create problems, both for claims and for your registration.

•      Known issues are not notified before you leave. If you are aware of something that might become a claim, tell your current insurer in writing before that policy ends. Under section 40(3) of the Insurance Contracts Act 1984, written notice of those facts given before the cover expires means that policy can respond to a claim made later. A new insurer will usually ask about known circumstances on the proposal form, so answer those questions fully.

•      Comparing on premium alone. A lower premium can reflect a lower limit, a higher excess, defence costs sitting inside the limit, or exclusions that do not suit the services you provide.

A checklist before you switch

•      Find the retroactive date on your current schedule.

•      Ask for the retroactive date on the new quote in writing, and confirm it matches or is earlier.

•      Line up the dates so the new policy starts the day the old one ends.

•      Notify your current insurer in writing of any circumstances that might lead to a claim, before the policy expires.

•      Compare the limit, excess, defence costs and exclusions, not just the premium.

•      Update your details with the TPB. It requires you to do this whenever your policy changes, including every renewal.

Next step

Abacus Australia has arranged professional indemnity insurance for accountants since 1990. If you are weighing up a move at renewal, send us your current schedule through the Get a Quote page and ask us to compare it with a new quote, retroactive date included. You can also read more about how our professional indemnity insurance for accountants is structured, or see what to check before you renew.

This article is general information only and does not take into account your objectives, financial situation or needs. Read the policy wording before making a decision about cover.Renewal is when most accountants compare professional indemnity quotes, and the premium is the number everyone looks at first. It is the easiest figure to compare. When you switch insurers, though, the figure that matters more sits further down the policy schedule: the retroactive date.

Get it wrong and a claim about work you did years ago can fall between your old policy and your new one. This article explains how claims made cover works, what the retroactive date does, what your regulators require, and what to check before you move.

Claims made vs occurrence cover, in plain English

Professional indemnity policies are usually written on a claims made and notified basis. As the Tax Practitioners Board explains, this means the claim must be made against you and reported to your insurer during the policy period for the policy to respond.

An occurrence policy works the other way around. It responds to events that happen during the policy period, whenever the claim eventually arrives. Most PI cover for accountants is not written this way, and CPA Australia lists claims made or claims made and notified cover, rather than occurrence cover, as best practice.

The practical result: the policy that responds to a complaint about a return you lodged in 2021 is the one you hold when the client complains, which might be in 2027. Your current policy is carrying all of your past work, not just this year's.

What the retroactive date does

The retroactive date is printed on your policy schedule. The policy covers claims arising from work done on or after that date. Work done before it is outside the cover, even if the claim is made while the policy is in force.

If you have held continuous cover for years, your retroactive date should reach back to the start of that history. That long, unbroken date is part of what you are paying for, and it is the thing most at risk when you change insurers.

What your regulators require

If you are a registered tax or BAS agent, the TPB requires retroactive cover. Your new policy must cover you back to the earlier of the retroactive date in the policy you are renewing, or the start date of your first policy if you have held a series of continuous policies. The TPB also makes clear that you do not have to stay with the same insurer to meet this requirement.

If you hold a CPA Australia public practice certificate, CPA Australia requires a retroactive date no later than seven years before the start of the period of insurance.

CA ANZ and IPA members should check their own body's current requirements as well. Where more than one set of rules applies to you, the strictest one is the one you have to meet.

Where switching goes wrong

•      The new policy starts a fresh retroactive date. If the new schedule shows a retroactive date equal to the new policy start date, earlier work may not be covered. Check the date on the quote, not just the price.

•      There is a gap between policies. The TPB requires you to maintain PI cover for as long as you are registered. Even a short gap between the old policy ending and the new one starting can create problems, both for claims and for your registration.

•      Known issues are not notified before you leave. If you are aware of something that might become a claim, tell your current insurer in writing before that policy ends. Under section 40(3) of the Insurance Contracts Act 1984, written notice of those facts given before the cover expires means that policy can respond to a claim made later. A new insurer will usually ask about known circumstances on the proposal form, so answer those questions fully.

•      Comparing on premium alone. A lower premium can reflect a lower limit, a higher excess, defence costs sitting inside the limit, or exclusions that do not suit the services you provide.

A checklist before you switch

•      Find the retroactive date on your current schedule.

•      Ask for the retroactive date on the new quote in writing, and confirm it matches or is earlier.

•      Line up the dates so the new policy starts the day the old one ends.

•      Notify your current insurer in writing of any circumstances that might lead to a claim, before the policy expires.

•      Compare the limit, excess, defence costs and exclusions, not just the premium.

•      Update your details with the TPB. It requires you to do this whenever your policy changes, including every renewal.

Next step

Abacus Australia has arranged professional indemnity insurance for accountants since 1990. If you are weighing up a move at renewal, send us your current schedule through the Get a Quote page and ask us to compare it with a new quote, retroactive date included. You can also read more about how our professional indemnity insurance for accountants is structured, or see what to check before you renew.

This article is general information only and does not take into account your objectives, financial situation or needs. Read the policy wording before making a decision about cover.