ICA corporate affairs manager Rod Frail says the dramatic increase in premiums is not just a case of insurers cashing in.
"The introduction of new prudential standards by APRA (the Australian Prudential Regulation Authority) in the new General Insurance Act... mean professional indemnity is much more capital intensive," he said. "The position was exacerbated by the collapse of HIH and FAI because they had a relatively large share of the professional indemnity market".
Falling stock markets, where insurers have traditionally invested a high proportion of collected premiums, has lead to an erosion of the total capital available to insurers to underwrite policies. According to Frail this is an area of significant concern.
"There's a relatively small amount of capital available to underwrite [professional indemnity]," he said. "There is more capital required, therefore less risk can be covered".
"Generally capital is tight in the insurance industry," he added.
There aren't even that many companies that provide these types of insurance policies in the IT space, Frail said.
"Professional indemnity is a reasonably specialised area with a limited number of players, and within that, professional indemnity within IT is even more specialised," he told ZDNet Australia.
Making things particularly risky to insurers is the general volatility of the IT industry, and while claims haven't been going up, there's potential for some big lawsuits to cripple the insurers.
"The insurers regard IT as quite a volatile area - it's the potential for high claims that they're looking at," he said.
High customer expectations of integration projects in particular -- that customers do not feel have been fulfilled -- is an area Frail says could lead to problems, and very expensive legal costs.
"You need expert witnesses... they're factors as well," he said.
Adding insult to injury, a High Court decision made in 2001 has turned professional indemnity insurance on its head.
"There was a decision in 2001 called FAI vs Australian Hospital Care which turned [professional indemnity] upside down. It made a ruling that you could still notify your insurer after the policy run out," Frail said. "There are now potential claims out there that may go back many years that the insurer hasn't made any allowance for".
It is this uncertainty that has been a major contributing factor to price hikes.
The increases are necessary, Frail says, because insurers are currently losing money in the liability classes. If the premiums don't go up, the results could be catastrophic.
"We all know from recent experience what happens to insurers that don't collect enough premium to cover their claims - you get a collapse like HIH," he said.
It's not all bad news, though. Frail says the government is currently addressing the issues and he expects some relief to trickle down to policy holders, although it will take some time.
Click here to read about the IT industry's reaction to the premium increases.
How long do they think they can use HIH as an excuse?