Finance brokers must be covered by, or personally have in place, Professional Indemnity (PI) Insurance for no less than $2 million for any one claim and $2 million in the aggregate.
The insurance policy must also have at least 12 months PI 'run-off' cover, which you should check with your PI insurer to ensure you are appropriately covered.
When applying for MFAA membership individual applicants will need to provide a PI certificate of currency showing your name and/or your employer's name. You may need to ask your employer for a copy of the current PI certificate of currency to attach to your application.
Where your name or your employer's name is not noted on the PI certificate of currency, you must provide written evidence from either the PI insurer or the insured showing that you are covered under an alternative PI insurance policy.
Professional Indemnity Run-Off Cover
As professional indemnity (PI) insurance is on a 'claims made' basis, you need always to be holding a PI policy when a claim is made. This is important as potentially claims could be made some years after a loan is taken out and the insured may no longer be working in the industry or may have moved to a different aggregator group under a different PI cover from the one which existed when the loan was taken out. In these situations, the finance broker (loan writer) may not be covered for the claim.
While this may not be an issue of urgency now if you are operating under a current PI policy, it could impact you, in respect of claims made well after the event, if you subsequently leave the industry, or perhaps have changed PI policies over the past few years. The way to overcome this and not be exposed to claims coming 'down the track' is to take out 'run-off' cover.
It is an MFAA policy that all full members should have at least 12 months PI 'run-off' cover (check with your insurer to ensure you are appropriately covered).
