PI scheme futile without professional status: academic

Kate Cowling


July 28, 2017

A professional indemnity (PI) insurance scheme, similar to the one used in law, would not work in financial planning because it is not a profession, a leading academic has said.

Speaking as part of a panel at the Financial Services Council Leaders Summit, professor Pamela Hanrahan, a financial services law expert from the University of NSW, said risk mitigation strategies could not be easily transplanted without the professional architecture to support it.

“The difference in a profession is that the professional body can put in place mitigation strategies like continuous professional education, risk management through the Law Society, and so on,” she said.

Without a code of ethics in place or a system to check industry participants’ PI insurance status, she questioned how it could be applied.

“If you’re trying to export the professional indemnity/fidelity model to an industry that is not a profession… how do you do that? Can you make an insurance-type solution around an industry that doesn’t [have its] own body and doesn’t have any of the professional architecture around risk mitigation strategies?”

In response, fellow panelist Shane Tregillis, Financial Ombudsman Service chief ombudsman, said a code of ethics and professional standards were in the pipeline, to which Hanrahan replied “sure in 2024”.

Tregillis responded: “There are codes of practice. To me it’s a defeatist argument to say, ‘We’ve got to wait until ASIC gets involved. I do think the industry can step up; the FPA for example, has stepped up in terms of looking at PI and other issues in professional standards. “It is a fragmented industry, it’s not quite so easy.

“We support the mitigation measures designed to reduce the claims occurring. If we don’t get there, we will all fail.”


 Financial Ombudsman ServiceFinancial Services Council Leaders SummitPamela Hanrahan,
 professional indemnityShane TregillisUniversity of NSW