There has been an explosion of class actions, with settlements topping A$1.5 billion ($1.1 billion) last year and the cost of director insurance climbing by as much as 400%.
Mr Andrew Porter, president of the Group of 100 representing Australia's leading CFOs – who is also CFO of listed company AFIC – warned that insurance premiums for directors are "skyrocketing", according to a report in The Australian Financial Review.
He called for a review of the issue, following a recommendation by the Australian Law Reform Commission, which suggests disclosure laws may need to be relaxed, litigation funders regulated and lawyers' fees examined to tackle the problem.
"Insurance fees will continue to skyrocket as class actions grow and settle out of court," Mr Porter said.
"Every listed company in Australia is now seeing a dramatic increase in D&O [directors and officers'] liability cover. We have been told by our insurers that it is a direct result of class actions, so there is a cost to shareholders as well as on the company's and directors' time."
Mr Ewen McKay, a management liability expert at global insurer XL Catlin, said the price of directors and officers' insurance had "increased spectacularly" over the past 18 to 24 months.
"A good result would be a 40% increase on last year's premium, but we have seen some companies pay 400% more than their expiring policy," Mr McKay said.