A Closer Look At The Current State Of Professional Liability Insurance Premiums
The economy is booming, and with it design professionals are experiencing increased demand for their services. Subsequently, and necessarily, their risk in the marketplace is also rising. As design firms’ see increases in their exposure, will we see a boom in insurance premiums, as well? The ACEC 2018 PLI Survey results are in, and the implications are remarkable.
According to the ACEC publication, ENGINEERING INC., professional liability insurance premiums have remained nearly flat for the survey’s 442 respondents. This is despite 68% of reporting member firms replying that they experienced increases in revenue in 2017. In fact, carriers offered such attractive renewal terms, generally speaking, that 87% of respondents reported that they renewed their policies with the incumbent insurance carrier.
The data indicates that premiums were relatively unchanging for 37% of firms. Further, it shows that the percentages of firms experiencing marked increases or decreases in their professional liability insurance premiums came in nearly half and half at 27% and 29%, respectively. That’s flat! It seems that the professional liability insurance marketplace is maintaining a healthy, highly competitive status. Thus, even where increased revenues may cause inflating premiums, the rise is not dollar-for-dollar commensurate with the revenue growth causing it. And, the answer to whether premiums are booming is a resounding “no”.
In her July/August 2018 ENGINEERING INC. article, “2018 PLI Survey Growth, Stability and Change”, Maureen Conley writes, “Firms employing good risk management practices may be much better positioned for growth,” although, as Conley is quick to point out, “risk management is especially important in the large majority of firms without in-house counsel or full-time risk managers.” Conley highlights the number of responding firms that fall into these categories at over 90%.
a/e ProNet’s President, and Vice President of Risk Strategies Co., Michael Welbel, mentioned to Conley that, “Purchasing a PLI policy is really buying claims handling, and you do not know until you have a claim how good that service may be.” This poses a problem for design firms that opt to purchase their insurance through non-specialist insurance brokers, or brokerages with widely varying specialties. The fact is that not all carriers are alike, and not all a/e insurance programs are designed to fit the same needs. Using a/e specialist brokers who understand this nuanced marketplace and the unique needs of design firms is key to obtaining effective risk management. Although, it seems that insurance premiums are stable for now, architects and engineers have an opportunity to bolster their risk management practices in preparation for future growth.
Maureen Conley’s full article, “2018 PLI Survey Growth, Stability and Change” is available on the ACEC’s website, HERE.
The results of ACEC’s 2018 Professional Liability Insurance Survey of Member Firms can be ordered HERE.