There are many reasons for an architectural firm to purchase professional liability insurance including business survival and contract requirements among others. There are also many considerations when selecting this insurance for your firm. In evaluating all pertinent considerations, it is important to be aware of current trends within the professional liability insurance market.
A common trend recently expressed by most professional liability carriers was that of excess capacity. The number of carriers in the A&E professional liability market has grown in recent years to 50—and now to 60 carriers. The large number of carriers is causing a great deal of competition in setting rates—which is good for A&E companies but difficult for the carriers. Most carriers estimated that rates for the coming year will be flat or at most, rise only modestly (0 to 5%). A concern was raised that this capacity combined with low rates and low returns on investments will cause some carriers to exit the marketplace like Zurich did recently. However, one carrier mentioned that he had heard about three new carriers that will be in the market in the next year.
In general, carriers reported that claim frequency seems to be trending down and the severity of claims is trending up. Carriers are seeing a trend of A&E firms seeking to increase the limits at the request of their clients. $1 million used to be the normal claim limit and now it seems that more and more are looking for a $5 million limit.
The areas that are experiencing the highest level of claim activity are:
- Geotechnical Engineers
- Structural Engineers
- Schools—especially publicly funded
- Residential—especially condos, although few have been built in the last 5 years.
The first step for any firm in assessing your professional liability insurance needs is to consider your firm’s exposures. Underwriters will want to review basic information about your firm such as total billings, claims history, use of written agreements, other firm services, project and contract requirements, and more.