Consultants hit by insurance hike

26 Mar, 2003 10:00 PM

A SIX-FOLD increase in professional indemnity insurance premiums this year may force some agricultural consultants to the wall and is likely to see those remaining in business increase their charges to farmers.

The premium increase also has the potential to stall environmental projects deemed by the Federal Government to be of national significance.

The Australian Institute of Agricultural Science and Technology (AIAST) - which represents about 2000 agricultural scientists and technologists - has for a number of years operated a group insurance scheme providing 450 to 500 of its members with indemnity insurance. Such consultants work across the spectrum in areas like agronomy, breeding genetics and research and development.

Last year the scheme enabled the institute's members to typically get $2 million in indemnity coverage for about $1000. This year, the coverage started at about $5500 to $6000.

Similarly the policy excess last year in the first instance of a claim was $1000. This year, the excess has started at $15,000, going up to $25,000.

Adding to the woes, this year areas such as genetically modified crop research and development, salinity and the environment were excluded from the coverage.

Institute executive director Allan Jones said only about 200 members who last year had indemnity coverage through the scheme had renewed.

Of the 15 or so insurers invited to tender for the insurance scheme, only one was "prepared to have a fly at it", he said.

"About half have renewed - half haven't at this stage. I guess the other half are still trying to find alternatives and there aren't any out there or are negotiating on their range of activities," Mr Jones said.

Mr Jones said it was not a viable proposition for a part-time consultant earning $40,000 to $50,000 a year to pay $6000 in indemnity insurance and then have a big excess on the policy.

He said some part-time consultants were thinking about not taking up the insurance cover because it was prohibitively expensive - a difficulty given a lot of their clients required it.

Mr Jones said that of the 250 or more who had not renewed their insurance, some of the part-time consultants, or those getting towards the end of their careers would simply choose to close their businesses.

He believed the decision to exclude areas from coverage this year was taken because the insurer was "concerned about the catastrophes that could happen there - I guess because they're unquantifiable".

A "real concern" was the institute's members could not get coverage for work in areas such as salinity, wastewater management and environmental surveys.

"These are big issues that the (federal) government has identified as national priorities and they outsource a lot of that work to (the) private consulting sector (which) can't get insurance for those activities at the moment.

"So it's got the potential to really stall and stop things dead."

Mr Jones said governments could perhaps consider reviewing the requirements for indemnity insurance for outsourced work.



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