Professional indemnity insurance provides key insurance cover for your mortgage and finance broking business. When a complaint is made to AFCA or action is taken against your business, it can provide financial assistance with legal and compensation costs.
As with all insurance contracts. there are a range of conditions and obligations that you need to understand. A common misunderstanding is when you should contact Insurance House with respect to an incident that has occurred.
Let’s step through just why reporting is so important and the implications of not doing so.
Why do I have to report?
Professional Indemnity insurance is issued on a ‘claims made and notified’ basis, which means the policy responds to claims first made against the insured during the policy period and notified to the insurer during that same policy period.
So for a claim to be covered, your policy must have been in place at the time the allegation was made against you, and when the claim is lodged.
Many professionals believe that they do not need to report the incident to their insurer until a formal notification or demand is received. However, if this is some time after you first became aware of the matter it could lead to a question about non-disclosure.
You are obligated to inform your insurer as soon as practical after you first become aware of a situation which could potentially result in a claim being made – even if your client or a third party has yet to make an official complaint or engage a lawyer.
What should I report?
Examples of incidents that may require a notification are:
- A complaint to AFCA
- You’re accused of failing to provide a service as promised or advertised
- A client has criticised or complained about your services – even if you feel the criticism is unjustified
- A client alleges you recommended an inappropriate product for them
- Any mistake, oversight or omission in your work, or work of your credit representatives or employees, which you are aware of that could possibly lead to a claim being made – even if your client is not yet aware of it
- Any complaint that your aggregator receives or is processing on your behalf
If an incident arises that is not listed above or you have a question it’s always recommended that you put in a call to our team.
What if I don’t report?
Our key message is to report – because a failure to notify us as soon as reasonably possible could, in a worst-case scenario, lead to your claim being rejected. Even if you’re unsure whether it’s worthy of letting us know or not, it’s in your best interests to do so. If in doubt, call and talk to our team for guidance.
But surely I can handle a small issue myself?
No matter how small the problem, you may inadvertently admit liability which can result in your insurer suffering prejudice and jeopardise the chance of your claim being paid.
Reporting any issue prior to acting yourself will allow us to provide the appropriate response to (hopefully) settle the matter quickly and efficiently without it escalating.
What should I do when I am notified of a complaint made to AFCA?
When a complaint is made to AFCA, notify us immediately!
In this situation, the insurer will review the complaint and may make the decision to appoint solicitors who have expertise with the dispute resolution process. They will assist you with your communications to the regulatory body to hopefully resolve the notification early.
Even when you disagree with the allegations being made or do not consider them serious, it is still important to notify. Time and time again we’ve seen how a matter can escalate to an investigation (or even further to a hearing) and the insured professional has risked their policy coverage by not notifying us.
Similarly, when your aggregator is managing the complaint with AFCA you should still notify us. You seriously jeopardise the chance of any subsequent claim being paid if your insurer has not been aware of the situation.
Do yourself a favour
In summary, few mortgage brokers will ever have a claim or complaint made against them. However, if it does happen, it can be very upsetting – so do contact Insurance House immediately and let us support you. We will guide, assist and ultimately alleviate what can rapidly become a very stressful experience if not managed correctly.
Our advice is general in nature to read the full General Advice Warning click here.