Treasury Initiates Review of Professional Indemnity Insurance to Support CSLR

The CSLR was established to ensure that consumers who have suffered losses due to misconduct have access to compensation when other avenues have failed. Since its inception in April 2024, the scheme has facilitated payments of up to $150,000 to eligible consumers with unpaid determinations from the Australian Financial Complaints Authority (AFCA).

However, the sustainability of the CSLR has come under scrutiny, particularly in light of a $47.3 million special levy announced for the 2025-26 financial year. In response, the Treasury is seeking ways to create a more robust 'first line of defence' through PI insurance to fund consumer compensation, thereby reducing reliance on the CSLR.

The consultation paper invites stakeholders to provide feedback on the current operation of PI insurance and suggest reforms to enhance its effectiveness. The government aims to balance the need for a sustainable CSLR with considerations of the supply, quality, and pricing of PI insurance, as well as the regulatory and business costs for licensees.

Submissions are open until 13 February 2026, and the Treasury plans to release an options paper on broader reforms to the CSLR later in the year. This review underscores the government's commitment to ensuring that consumers have access to compensation while maintaining the viability of the financial services industry.

For professionals and businesses, this consultation represents an opportunity to influence the future landscape of PI insurance and the CSLR. Engaging in this process can help shape policies that balance consumer protection with the practicalities of obtaining and maintaining adequate insurance coverage.