Compulsory Professional Indemnity Insurance

Rosy Sullivan

In our regular review of what is happening on the NSW Fair Trading website, we luckily found (almost missed it), the new regulations relating to Professional Indemnity Insurance.  We have read the documents and provide the following notes as a summary for your information.  If you are a Licensee-In-Charge of an agency, or are working commission only with your own corporation under a separate banner, this is most definitely some information that you need to read.  As more information becomes available on this insurance provision, we will keep you up-to-date.


In a positive step forward for the real estate industry, NSW Fair Trading has introduced compulsory professional indemnity insurance for licensees under the Property Stock and Business Agents Act 2002.  Professional indemnity insurance is now a condition of your license, not an optional extra.


The Property, Stock and Business Agents Amendment (Professional Indemnity Insurance) Regulation 2012 commenced on 1 January 2013, and requires that all licensees have cover of at least $1 million for any one claim and not less than $3 million in the aggregate for all claims made during the period of insurance.


REINSW have spent years lobbying for this change, and describe the move as “a win for consumers and a win for the profession”.  Their research indicates that 75% of agents already have the level of insurance required, which to us suggests that these new requirements are simply bringing a minority of agents into line with standard industry practice.


The regulations specify the liabilities that your insurance policy must provide coverage for. They are as follows:


  • liability arising from any acts or omissions of the licensee that constitute:
    • negligence, or
    • unintentional misleading or deceptive conduct, or
    • breach of professional duty, or
      • unintentional defamation, or


  • unintentional interference with intellectual property rights;
  • vicarious liability arising from any acts or omissions of an employee, agent or other person engaged in the agency business that constitute:
    • negligence, or
    • misleading or deceptive conduct, or
    • breach of professional duty, or
    • defamation (for which the claimant is not at fault), or
    • interference with intellectual property rights (for which the claimant is not at fault), or
    • fraud or dishonesty by the employee, agent or other person (for which the claimant is not at fault).

    A licensee may be covered under a professional indemnity insurance policy taken out by their employer.  However, if this is the case it is vital that the licensee is named on that policy otherwise they won’t be covered. Also, if you are a licensee with your own registered company, but are currently engaged by another company to provide agency services, you must have your own insurance policy.  However, licence holders that are not currently engaging in any activities for which a licence is required do not need insurance. For example, this exception would apply to licence holders who are trainers/educators, currently unemployed or working in another industry.


    The new Regulations are now in force. However, transitional arrangements mean that this requirement does not come into effect until 1 July 2013, allowing licensees who do not presently have any professional indemnity insurance coverage time to obtain a suitable policy. If a licensee is insured under an existing policy issued before 1 January 2013, the policy will be deemed to comply until it expires or until January 2014, whichever comes first.


    This newsletter is merely intended to alert you to these new licensing changes, but we strongly recommend that you read the new regulations carefully yourself to ensure you comply.  Additional helpful information can be found on the NSW Fair Trading page at www.fairtrading.nsw.gov.au under the section on licence conditions.



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