Insurance Requirements

What are Insurance Requirements in Government Procurement?

Insurance requirements are the mandatory insurance policies that government agencies require suppliers to hold as a condition of tendering for and performing government contracts. These requirements protect the agency, the public, and the supplier’s workers against losses arising from the contract work. Failure to hold the required insurance is typically a grounds for a tender being deemed non-conforming.

Common Insurance Types Required

Australian government tenders typically require some or all of the following:

• Public liability insurance — covers claims by third parties for injury or property damage arising from the supplier’s activities. Minimum coverage for government contracts is commonly $10 million to $20 million.
• Professional indemnity insurance — covers claims arising from negligent advice, design errors, or professional services. Required for consulting, IT, engineering, and advisory contracts. Minimum coverage is typically $2 million to $10 million.
• Workers’ compensation insurance — mandatory under state and territory legislation for all employers. Covers employee injuries and illnesses arising from work.
• Product liability insurance — required when supplying physical goods. Covers claims arising from defective products.
• Motor vehicle insurance — required when the contract involves the use of vehicles.
• Construction-specific insurance — for building and infrastructure contracts, contract works insurance, plant and equipment insurance, and sometimes environmental liability insurance may be required.

How are Insurance Requirements Specified?

Insurance requirements are set out in the Conditions of Contract and typically specify:

• Type of insurance required
• Minimum sum insured for each policy
• Duration — insurance must be maintained for the contract period and sometimes beyond (e.g., professional indemnity for a “run-off” period)
• Evidence required — certificates of currency must be provided before contract execution and renewed annually

Tips for Tenderers

• Check insurance requirements before deciding to bid — obtaining new policies or increasing coverage takes time and money.
• Factor insurance costs into your pricing — particularly for high-coverage professional indemnity policies.
• Keep certificates of currency readily available — agencies will request these during Due Diligence.
• Notify your insurer about government contracts — some policies have notification requirements for new contract work.