Conveyancers FAQ's
Question 1: Why has my premium gone up this year?
Answer: 

One of the variables that affects how much premium you pay is your Declared Fees. An increase in your Declared Fees will result in an increase in your premium, such that your premium increases relative to your business growth.

However, the largest driver of premium increases continues to be claims, both against you individually and against the PI Program as a whole. This year that value of claims has continued to rise, following the trends of previous years.

How many claims have been reported and how much has been paid in claims?

As at 14 April 2023, we’ve received 75 claim notifications during the current policy period, consisting of $390,000 claims paid, along with claim reserves of $1,900,000. The overall outstanding claim reserves across all periods is now $3,800,000.

How much extra premium am I paying?

With effect from 1 July 2023, premiums will increase according to the table below:

Premium Band

2022/23 Policy Period

2023/24 Policy Period

Percentage Increase

Standard Premium Rate

3.18% of Declared Fees

3.88% of Declared Fees

22%

Minimum Premium

Note: this Minimum Premium applies to those Conveyancers with $196,250 or less in Declared Fees as at 1 July 2023

$5,000 plus charges

$6,250 plus charges

25%

On the basis that you have not had any claims:

  1. If your Declared Fees have not increased, your premium will increase by 22%
  2. If your Declared Fees have increased, your premium will increase by more than 22%, as the increased premium rate of 3.88% is applied to your increased Declared Fee amount.
  3. If you are subject to the Minimum Premium, your premium will increase to $6,250 plus charges.

Note: if you have had claims, an additional premium amount will also be applied which increases your premium even further (see below).

If I have had a claim or claims, will I be paying more premium?

If you have had a claim or claims, the Insurer will apply a ‘claims loading’ which increases your premium even further. The Insurer determines the amount of the claims loading by each individual member, according to the Insurer’s underwriting guidelines.

I have not had a claim, why am I paying more premium?

The PI Program operates as a Master Policy, which delivers significant benefits to members by providing broad coverage including unlimited run-off cover to former conveyancers. When claims increase overall, everyone is affected and all members must contribute to ensure a sustainable Master Policy is maintained. However, those members who have had claims will still pay more premium than those members who are claims-free.

What has been the premium history of the PI Program?

Premiums are particularly driven by the scheme’s claims experience. Claims over recent years have continued to grow in number and amounts paid, pushing premiums up.  This works the same with all insurances, business, motor, and household, as examples. 

When the AIC’s Master Policy commenced in 1993, premiums were 2.36% of declared fees, subject to a minimum of $5,000.  Taking account of CPI, that minimum premium equates to around $12,000 in today’s terms.  Over the 30 years since inception the scheme has seen premiums go up and down. In fact, for 11 of those 30 years premiums went down, including a substantial reduction in the 2020 Covid year, where the Aggregate Infill surplus was returned to all conveyancers. 

In 2021 premiums were 2.35%, with minimum of $3,700.  Since 1993 average annual increase in premium has been around 2% and minimum premium by 1%.  Although we can’t easily predict future premiums, it can be expected they will go up or down, based on these factors and history over 30 years.  The most appropriate way to reduce future claims, and therefore premiums, is to recognise and manage risks and to continue to improve the knowledge and skills of all conveyancers.

What is happening with refunds from Revenue NSW for eligible Surcharge Purchaser Duty (SPD) claims (Finland, Germany, New Zealand, and South Africa)?

The Insurer is currently working with Revenue NSW to identify those claims affected and a process regarding reimbursement. However, from our initial investigations we have identified only 15 claims that are potentially affected by the refund, meaning this refund exercise will not have a material impact on the overall claims experience of the PI Program.

Are SPD claims still occurring?

Despite numbers being nowhere near what they were in the 2021-2022 financial year, we are still receiving some SPD-related claims, with 9 claim notifications received during the current policy period, of which 6 are claims amounting to $132,000, with an outstanding claims reserve of $380,000.

 
Question 2:  Why do licensed conveyancers need to have professional indemnity insurance?
Answer:

For any licensed conveyancer undertaking conveyancing work in New South Wales, it’s a mandatory requirement of their licence conditions to maintain a policy of professional indemnity insurance (‘PI’).

PI is essential for professionals to ensure that consumers have trust in their conveyancer. PI is also necessary to protect the conveyancer from being personally liable for any errors or mistakes that they may make in their practice and therefore protects their personal assets.

Question 3:  Can a licensed conveyancer choose their own professional indemnity insurance?
Answer:

No. Under the Conveyancers Licensing Act 2003, the Commissioner for NSW Fair Trading can only approve one PI policy that licensed conveyancers must be insured under when carrying out conveyancing work.

 
Question 4:  Why is there only one policy available to be approved by NSW Fair Trading?
Answer:

There are several reasons why only one policy is available to licenced conveyancers including:

Comparable insurance – Law practices in New South Wales also have a single approved policy that is provided by Lawcover.  When licensed conveyancers were formed in 1992, it was mandated that they should be on an equal footing with legal practices in term of their PI insurance.

Unique nature of conveyancing – consolidating insurance into a single policy assists insurers to understand the profession’s unique needs and requirements including the nature of its claims, thus encouraging those insurers to specialise and ensure their continued long-term support.

One approved policy creates a larger premium pool – spreading an insurer’s risk exposure across the entire profession, compared to having multiple policies offered by multiple insurers, each with lower premium pools covering varying and a limited number of conveyancers.

One tailored policy wording – that applies across all licenced conveyancers in New South Wales, enabling a consistent and much broader coverage, than if multiple insurers were providing their own policies with varying policy terms and conditions.

An example of this is the run-off cover that the PI Program provides for conveyancers who have closed their business or retired.  Run-off cover protects these former practitioners against claims that are made after their business has ceased, even though the work they performed was many years ago.  This valuable run-off cover is unlimited i.e., not limited to a set period and continues to protect approximately 300 former practitioners to date.

Importantly, former conveyancers are not charged an additional premium at the time they cease operating, as the cost of the run-off cover is built into PI Program’s overall premium pool.  If a former practitioner took out their own run-off policy, the cost is approximately 3.5 x the conveyancer’s annual premium at the time they ceased operating, which is a significant cost.

Many other professionals such as architects, engineers etc. must continue to pay premiums to maintain run-off protection after they close their practice and, in some instances, are unable to purchase it due to prevailing insurance market conditions.

 
Question 5: Are licensed conveyancers employed by a legal practice in New South Wales also covered under the PI Program?
Answer:

No, they are excluded from cover under the PI Program as they are protected under their employer’s PI policy insured through Lawcover.

Question 6: How do licensed conveyancers know that their PI insurance is competitive?
Answer:
  1. While each conveyancer’s insurance contract is assessed on its own merits, the aggregate of all conveyancers’ insurance is presented to current and potential insurers as one, thus benefiting from economies of scale. As the PI Program is heavily influenced by claims, it is actuarially assessed each year by the insurer to confirm that it is both stable and competitive.
  2. Every 3 years, NSW Fair trading requires Austbrokers SPT to re-market the PI Program to alternative insurers to ensure that the premium and the terms & conditions offered by current insurers are competitive. 
 
Question 7: How is the policy structured under the PI Program?
Answer:
  1. The policy is structured as a single Master Policy that sets out the terms of the insurance which has been agreed between the insurer and AICNSW on behalf of all the licenced conveyancers in New South Wales, along with a Contract of Insurance which includes the full policy terms, conditions and applicable exclusions.
  2. The Master Policy authorises Austbrokers SPT to issue individual Certificates of Insurance to each conveyancing practice which confirms the limit of indemnity, the excess and other important information.
Question 8: What does the policy under the PI Program cover?
Answer:

The PI policy:

  1. Covers licensed conveyancers practicing as sole practitioners, partnerships as well as under incorporated entities.
  2. Indemnifies the conveyancing practice for claims made against it for any civil liability that arises from carrying out conveyancing work during the policy period. Civil liability includes negligence, misrepresentation, misleading and deceptive conduct, breaches of consumer law, breaches of intellectual property rights and allegations of defamation.
  3. Pays for compensation, for example damages awarded against the conveyancing practice or settlements that are reached and pays for the claimant’s legal costs plus your own legal defence costs.
  4. Indemnifies the conveyancing practice for its liability for stolen deposit or settlement funds during a property transaction that they are engaged in.
  5. Provides additional covers such as the previously mentioned run-off cover for former practitioners, payment of legal costs and expenses incurred in attending a formal inquiry and reimbursement of cost and expenses incurred in replacing or restoring lost documents.
Question 9: What is the limit of indemnity under the PI Program?
Answer:
  1. The limit of indemnity applicable to each conveyancing practice is $5m any one claim, during the policy period, after an excess is paid by the practice.
  2. If the $5m limit is exhausted during the policy period by a single or several separate claims, then the limit is reinstated again for another $5m limit to pay for subsequent claims. Therefore, the total aggregate limit for all claims during the policy period is $10m.

If the total amount of compensation and claimant’s costs exceeds the limit of indemnity, then your defence costs are paid in addition to the limit. This is commonly termed a ‘costs exclusive’ or ‘costs in addition’ limit of indemnity.

Question 10: I regularly handle transactions for more than $5 million. Do I need a higher limit?
Answer:

The PI Program’s limit of indemnity has been assessed considering several factors including the level of property, prices, experiences from past claims, emerging exposures, the PI insurer’s assessment and the probability of a total loss of property occurring in light of proportionate liability of other parties involved in a property transaction.

After consultation with the PI insurers and Austbrokers SPT, it was not deemed necessary to increase the current limit of indemnity offered under the PI Program.

However, it is recommended that each conveyancing practice should undertake their own risk assessment including the likelihood of a claim (or series of claims) exceeding the $5m limit, taking into account any unique factors or circumstances of their own particular practice.

If you wish to obtain a quotation for a higher limit above $5m, please contact the team at Austbrokers SPT.

Question 11: What is the excess under the PI Program?
Answer:
  1. The standard excess is $5,000 for each claim.
  2. However, a higher excess of $10,000 applies where:
  • The practice acts for both the seller and the purchaser, or
  • Where the conveyancing practice has failed to comply with the ‘Failure to Warn Excess’ policy condition for claims that arise from clients being a victim of electronic crime or fraud that result in a loss. 

The Failure to Warn Excess policy conditions mandates that a conveyancing practice must provide evidence that they have alerted the client to the risks of electronic crime or fraud and the precautions they should take to minimise the likelihood of being the victim of electronic crime or fraud, by means of:

  • information provided in the conveyancer’s costs agreement or other terms of trade that were put before the client; and
  • a standardised email signature that was included on the conveyancer’s correspondence with the client, and this failure caused or contributed to the loss.
 
Question 12: Why is there a requirement to undertake a Risk Management Assessment?
Answer:
  1. To educate conveyancers about their risk exposure to claims and to limit this risk exposure. As you’ve probably determined, the more control over your own exposure to risk and thus less claims, means insurers are more comfortable with insuring your practice. The implementation of sound risk management by conveyancing practices is a key condition that both the AIC and insurers insists upon, prior to accessing the PI Program each year.
  2. Before a conveyancer joins, or an existing member renews, their policy under the PI Program, amongst other requirements, they must have completed a risk management assessment which requires successful completion of a Risk Management Questionnaire that is supplied by the AIC.
  3. Those conveyancers who do not satisfactorily complete the AIC’s Risk Management Questionnaire, are not prevented from joining the PI Program. However, their premiums are increased by 50% to reflect the higher risk exposure to the Program.
 
Question 13: What impacts the PI Program’s performance and hence premiums?
Answer:

The claims experience of the PI Program is the most significant driver of the premium cost. Unfortunately, the most up-to-date claims experience shows that the average number of notifications and total value of claims continues to rise.

Therefore, due to the PI Program’s deteriorating claims experience, combined with harder insurance market conditions generally, the PI insurers found it necessary to increase the premium rates this year. However, the policy wording remains unchanged this year with no significant reductions in cover.

Question 14: I have heard that PI premiums are increasing across many business sectors. Why is that the case?
Answer:

All industries experience cycles of expansion and contraction and this is particularly true of the insurance industry. Insurance cycles incorporate a soft market and a hard market, phases marked by an expansion and a contraction of insurance availability.

Hard market phase – a hard market is the upswing in a market cycle where capacity for most types of insurance decreases so premium rates increase, insurers reduce their exposure to certain occupations by declining certain risks, impose more policy restrictions/exclusions, reduce limits, and increase excesses. This is caused by several factors including increases in frequency and/or severity of losses, falling investment returns for insurers and other factors such as regulatory intervention.

Soft market phase – this side of the market cycle is characterised by lower frequency of claims, increased insurer participation and thus increased competition, lower premium rates, higher limits and broader availability of cover.

Unfortunately, the Australian and London PI insurance market is in a hard market phase of the insurance cycle, so those professions with a deteriorating claims experience that are renewing their PI policies in a hard market are now experiencing significant premium increases, restrictions to their policy coverage, with some occupations/professions, for example in the construction industry, now finding it extremely difficult, or in some cases impossible, to find PI insurancehas been