How much does professional indemnity cost?

Occupation 

Your occupation is a key rating factor. In simple terms, the greater the perceived risk of your occupation, the higher the premium will be.  This ‘risk’ that we refer to, is based on an insurer’s claims experience for your industry. Furthermore, the insurer will consider any legislative requirements that may attach to your occupation. For example, a building surveyor dealing with Building Codes and Australian Standards will attract a higher premium than an interior designer.

Some occupations, such as Accounting or Information Technology Services (IT), will be rated differently depending upon what work they do. For instance, an IT company providing software development will be rated different to a company that isn’t. Here’s another example. An accounting company that is providing auditing services to a public listed company will be rated higher than business that aren’t.

Professional Fees

Professional fees or income, will also be a factor in determining your professional indemnity insurance premium. In general terms, the greater the professional fees or income, the higher the exposure for the pi insurer. To illustrate, the cost of a PI policy for a business who has annual professional fees of $5,000,000 will be much more than a consultant who is turning over $100,000.

Size of Business

Similar to professional fees, the size of a business (including the number of staff employed) will influence your professional indemnity premium. For instance, the premium will higher for a national company with multiple employees compared to an independent consultant or contractor. In simple terms, the more work (and the more client’s) the greater the exposure for the insurer.

Policy Limit

The higher the professional indemnity policy limit, the greater the potential amount the insurer will pay. Hence why the pi insurer charges more money for the higher limit.

Claims Experience

Insurers require disclosure of all past claims made against your business. A history of frequent claims can significantly impact your premium rates. Reviewing professional indemnity claims examples can provide insights into common issues faced by professionals in your field, helping you better understand potential risks and coverage needs.

Minimum Premiums

All insurance companies will set a minimum premium for their product, regardless of the factors listed above. This is mainly due to their cost of doing business. As a result, you may find that your insurance premium will change if your turnover is $50,000 vs $100,000.

Who needs professional indemnity insurance in Australia? Generally, professionals who provide advice or services, such as consultants, architects, and IT professionals, need this insurance. Understanding professional indemnity claims to know can also guide you in choosing the right coverage and limits based on real claim scenarios relevant to your field.