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, Treasury is examining 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 highlights the need to balance proposals for enhancing PI insurance with considerations of supply, quality, and pricing, as well as the regulatory and business costs for licensees. Stakeholders are invited to submit their feedback by 13 February 2026, which will inform the development of reform options to support the ongoing sustainability of the CSLR.
Further consultation is expected early in 2026 through an options paper on broader reforms and technical changes to the CSLR itself. This proactive approach underscores the government's commitment to maintaining consumer confidence in the financial system's dispute resolution framework.
For professionals and businesses, this consultation represents an opportunity to contribute to shaping the future landscape of PI insurance in Australia. Engaging in this process can help ensure that any reforms are practical, effective, and aligned with the needs of both consumers and industry stakeholders.
