Greater Risks for Directors of Aged Care Providers

By Kacey Webb

Directors, senior executives and managers in the aged care sector are entering a new era of personal responsibility, and preparation is key.

From 1 November 2025, the reformed Aged Care Act will carry significant new civil and personal accountability measures for directors and executives of registered aged care providers in Australia.

These reforms require urgent attention and action.

Here’s what you need to know.

The New Era of Accountability for Directors

The reformed Aged Care Act puts directors under intense scrutiny. It is not enough to delegate oversight or trust that your systems are working. As a director, you’ll be personally responsible for undertaking continuous and active oversight of operational risk, quality and safety and regulatory compliance.

Some of the most significant penalties under the reforms include:

• Civil penalties up to 500 penalty units (currently $165,000) per breach for failures that result in serious injury, death, or whistleblower retaliation.
• Compensation orders requiring directors to personally pay compensation to individuals harmed as a result of serious breaches or failures in governance.
• Banning orders that can prohibit directors from working in the aged care sector in any role.
• Legal action against individual directors, even if the provider entity isn’t found at fault.

These regulatory changes will come into force from 1 November 2025, and they apply regardless of the size or status of your aged care organisation.

Why Your Existing Directors & Officers Insurance May Not Be Enough

Many directors assume their current Directors & Officers (D&O) policy has them covered. However, current D&O policies may not be sufficient in light of the increased compliance demands and personal exposure of directors under the reformed legislation. 

What Good Insurance Can, and Can’t, Do

D&O insurance is not a silver bullet. But when carefully structured, it can play a crucial role in shielding directors from the personal consequences of the new regime. A robust policy can help with:

• Covering legal costs and civil penalties (where legally insurable)
• Responding to court-ordered compensation claims for individuals harmed as a result of serious breaches or failures in governance
• Providing crisis management or reputational support in the event of a crisis
• Defence costs in regulatory investigations or direct litigation against directors.

However, insurance won’t cover everything. Some fines may be deemed uninsurable by law. And unless exclusions are clearly understood and negotiated, directors may find themselves unprotected when it matters most.

What Directors Need to Do Now

Given this changing regulatory environment, it is essential that every Aged Care Provider Board of Directors reviews their existing D&O policy prior to 1 November 2025.

There are many resources available to assist directors in preparing for the new Act. The Department of Health, Disability and Ageing have published resources on how to understand and prepare for the changes under the new Act: https://www.health.gov.au/our-work/aged-care-act/prepare.

Additionally, the AICD has developed a Director’s Guide for Quality Aged Care: https://www.aicd.com.au/regulatory-compliance/royal-commission-updates/aged-care/governing-for-quality-aged-care.html

From an insurance perspective, I suggest all aged care directors should immediately:

1. Review your Directors & Officers insurance with a broker who understands the aged care landscape.
2. Check for exclusions and limitations in your current policy – especially those relating to regulatory action, insolvency or whistleblower protections
3. Ensure your policy includes sufficient limits and that it extends coverage to all “responsible persons” as defined under the new Act.
4. Strengthen your internal governance and compliance systems, which insurers will now closely examine with pricing and underwriting your policy.

We’re Here to Help

At Breakwater, we work with aged care providers to place insurance programs that align with the real risks of the sector. We’ve been monitoring these legislative reforms closely and can help you assess your current position, understand your exposure, and secure the protection you need, before the changes take effect.

This isn’t just about insurance. It’s about safeguarding your career, your reputation, and the future of your organisation.

This article provides information rather than financial product or other advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, before you act on any information. In particular, you should review the Product Disclosure Statement (PDS) for any product that the information relates to before acquiring the product.

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