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13 October 2020
The Australian Institute of Building Surveyors (AIBS) has voiced concerns at a number of new professional indemnity (PI) insurance products in the market, warning its members to fully investigate terms and conditions.
In a communique issued yesterday, AIBS says some of the new products are backed by unauthorised foreign insurers (UFIs) who are not subject to Australian law.
“Because unauthorised foreign insurers are not regulated by the Australian Government, there is no guarantee that they are obliged to maintain sufficient financial adequacy to cover claims,” AIBS said.
“If they refuse to pay a claim you would need to take legal action against them in a foreign jurisdiction, a difficult and expensive exercise with little chance of success.”
Aside from the UFI issue, AIBS also took aim at another new product that is offering cover of up to $2 million with no cladding exclusions.
While it did not name the product or people behind it, insuranceNEWS.com.au understands AIBS was referring to the PI cover distributed by broker Coverforce.
Coverforce moved quickly to defend its product, which was launched in collaboration with the Royal Institution of Chartered Surveyors (RICS) and is 100% secured by Lloyd’s.
AIBS says it has been “advised of concerns” about the product, which was announced last week by RICS. RICS worked with Coverforce, its preferred local broker, to launch the product for the Australian market in response to withdrawal of cladding coverage by insurers globally.
AIBS says it has seen the product’s policy wording and believes it is “inconsistent and some clauses relating to cladding, finishing systems and wall panelling are contradictory in terms of what is covered”.
“Therefore, we urge all members considering obtaining any insurance products that are new to the Australian market to read the ‘fine print’ very carefully before accepting any quotation as the devil is always in the detail,” AIBS said.
Bovill Risk & Insurance Consultants, which says it is an AIBS recommended broker, has also expressed reservations.
“From what we have seen, there remains a considerable lack of clarity as to whether this product is acceptable to the regulators or not,” MD Chris Bovill told insuranceNEWS.com.au today.
“The question has to be asked why would an insurer be prepared to provide any sort of cladding cover and do so in the middle of a pandemic, in the middle of a hard market and when there is no legal requirement to do so?
“What is their motivation?”
A spokesman for Coverforce told insuranceNEWS.com.au the PI product, which is 100% backed by Lloyd’s, is “a fantastic product and great news for the industry.”
“We will be releasing a full response that addresses each misleading point in the AIBS communication within the next 24 hours,” the spokesman said.
AIBS says PI insurance continues to be a challenge for many building surveyors but "the situation for those who have survived the fallout is more stable at the moment than it was at this time last year".
"Nevertheless, premiums continue to increase and many new policies now include large excesses for each and every claim along with broad ranging exclusions in addition to cladding exclusions," it says.
The AIBS communique can be read here.