Why Professional Indemnity Insurance Costs are Rising for Engineers

If you're in the field of engineering, you might have noticed your premiums climbing, sometimes by 20% or more, and getting quotes might have become more complicated, especially in construction-related work. 

This isn't just a local issue. It's part of a broader hard market in Professional Indemnity Insurance for engineers across Australia. 

Let’s have a look at what's driving these changes in 2025. Explore why this is happening and what it means for engineering firms.

What is a Hard Market in Professional Indemnity Insurance?

A hard market refers to times when insurers face higher risks and losses, leading them to charge more for Professional Indemnity Insurance while offering less flexible terms. 

For engineers, Professional Indemnity Insurance covers claims related to errors, omissions, or negligence in your work. Think of design flaws or advice that leads to financial loss for a client. 

In Australia, this type of insurance is often required by law or contracts, particularly in sectors like construction, where projects can't proceed without it.

In 2025, the professional indemnity insurance market shows signs of softening overall, with some premium reductions for lower-risk professions. However, for engineers, especially those in high-risk areas (e.g. construction), the climate remains challenging. 

Premiums are still on the rise for many and coverage can be harder to secure due to ongoing factors from recent years. This mix creates a tricky landscape where some firms benefit from competition among insurers, but others face restrictions or outright refusals.

Key Factors Driving Rising Professional Indemnity Insurance Costs for Engineers

Several elements are contributing to these increases in Professional Indemnity Insurance costs. 

Here are some of the main reasons:

• Surge in Claims and Higher Loss Ratios: Insurers have seen a rise in the number and severity of claims, particularly in construction. For example, issues, such as non-compliant cladding, have led to massive payouts.
  
  Overall, loss ratios (the portion of premiums paid out in claims) have been poor, meaning insurers lose money on these policies. This has forced them to raise rates to stay profitable.
  
  
• Insurers Withdrawing from High-Risk Areas: Many insurers are pulling back from covering certain engineering disciplines seen as high risk, including structural, geotechnical, or fire engineering.
  
  This shrinkage in the market means fewer options, leading to higher premiums or no quotes at all for some firms. In construction, project-specific Professional Indemnity Insurance pricing remains elevated due to past losses, even as general capacity improves.
  
  
• Global Trends Affecting Australia: Reinsurance, the insurance that insurers buy, has become more expensive worldwide, passing costs down to local policies.
  
  Economic pressures (e.g., inflation and geopolitical issues) add to this. In Australia, Professional Indemnity premiums have risen 27% since 2015 with a spike from 2023 to 2024 driven by court judgments against engineering firms.
  
  
• Increased Litigation and Legal Costs: Courts are handling more complex cases and defence costs are climbing.
  
  For construction professionals, this is expected to harden the market sooner than in other sectors. Engineers in fields like design and construct often face additional scrutiny, with exclusions for bodily injury or other risks becoming standard.

These factors combine to make Professional Indemnity Insurance for engineers more expensive and less accessible, particularly in construction where risks are perceived as higher.

What This Means for Engineering Businesses in 2025

For many engineers, these rising Professional Indemnity Insurance costs translate to increasing premiums depending on your activities and claims history. 

If you're in a high-risk discipline, you might find terms tightened such as higher excesses, exclusions for certain work, or even unaffordable cover. This is a big deal because Professional Indemnity Insurance is frequently mandatory. Without it, you risk not being covered and essentially having large losses against your business..

On a positive note, for lower-risk engineering work, competition is increasing and some premiums are falling. But for those in challenging sectors, the hard market lingers, making it essential to shop around with an insurance broker who can access multiple options.

Looking Ahead in the Challenging Insurance Climate

The Professional Indemnity Insurance landscape in 2025 remains tough for engineers, especially in construction, with rising costs and tighter coverage reflecting years of claims pressure and market shifts. 

At Tank Insurance, we've helped many navigate this by comparing markets and negotiating terms. If you're facing these issues, understanding the reasons is the first step.

Got questions about insurance options, from improving risk management to finding the right policy? Feel free to reach out to us at Tank Insurance. 

We're here to make the process clearer and help keep your business moving forward!