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CPA says its members cannot find affordable insurers who will cover them for breaches of Trade Practices Act.

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Monday 7 July 2003

CPA says its members cannot find affordable insurers who will cover them for breaches of Trade Practices Act


MARK COLVIN: Just when Australians are comi ng to terms with the problems of insurance for doctors, a new insurance quandary is emerging. This time it's in the accounting profession. 


CPA (Certified Practising Accountants) Australia, one of the two major accounting professional bodies, says its members can't find insurers who'll cover them for breaches of the Trade Practices Act. And CPA Australia says if the Federal and State governments don't change the law soon, the cost to clients will sky rocket. 


Neal Woolrich has this report. 


NEAL WOOLRICH: Accountancy is the latest profession to be hit by soaring insurance costs, with some practitioners reporting premium increases of 500 per cent or more since early 2002.  


Just as concerning for accountants are the exclusions that are appearing in their policies, especially those that deny cover for claims made against them under the Trade Practices Act.  


The industry wants the Federal and State governments to introduce a concept of "proportionate liability" to limit legal claims against accountants to their share of any loss suffered by clients. 


Chief Executive of CPA Australia, Greg Larsen says without the changes to the laws, many other professions could also be affected. 


GREG LARSEN: The Federal Government has proposed changes to the Trade Practices Act. The State Governments have to approve new legislation under professional standards legislation - that takes time.  


But in the mean time, our members are at risk and I guess their clients are at risk because our members are in some cases not properly covered. It's not just an accounting problem, we've raised the issue several times and we're still working on the issue, but it's a problem of professions in Australia. 


NEAL WOOLRICH: And as Australians again turn to their accountants to prepare their income tax returns, Greg Larsen says clients should brace for cost increases. 


GREG LARSEN: They've been experiencing very significant cost increases for something like 18 months. So, the prices have been going up dramatically and that has been an issue of great concern to the members and to the profession. 


NEAL WOOLRICH: Perth accountant Ron Metcalf agrees. 


RON METCALF: Well, a very definite rise in premium costs. In fact, one of the reasons I don't have cover right now is because my latest premium indication from my past cover, or past insurer, has increase some 360 per cent from the previous year. And that's what's caused me to look outside, so, I haven't taken the renewal cover at this point. 


NEAL WOOLRICH: Ron Metcalf says he's struggling to find an insurer who'll cover him for claims under the Trade Practices Act. 


RON METCALF: I'm right in the throes now of having to renew my insurance claim, and I suppose I'm waiting with bated breath to see what kind of proposal does come back simply because if Trade Practices - and/or the associated State mirror acts, the fair trading acts in each State - don't cover me then I've got a major problem, because invariably most actions against accountants by their clients, most solicitors are clever enough to adjunct the provisions of the Trade Practices Act or Fair Trading Act. 


NEAL WOOLRICH: Ron Metcalf says the choice for many in the profession will be to either increase costs or leave the industry altogether. 


RON METCALF: Well, the costs have to be built in, there's no question about that, and I guess, it then culminates in slightly higher charge-out rates. So, you can recover from clients, but it does make it very hard to be competitive, and particularly, whilst you remain as a member of a professional body.  


I wouldn't think for one moment of retiring from my professional body because they do a lot of good things for me, and they're certainly a very valuable resource, but I think it's getting to the stage where a lot of members must be considering whether they remain a member of a professional body because we have the compulsory requirements to in fact to have PI cover whilst we are a member. 


MARK COLVIN: Perth accountant Ron Metcalf, talking to Neal Woolrich.