Risk Management | |||||||||||
FROM THE RISK MANAGEMENT
COMMITTEE 2003 Professional Liability Insurance Premiums: How Big a Bite? |
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by
Benjamin P. Fisher, FAIA 2002 AIA Risk Management Committee Vice Chair |
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Sticker shockalmost all of us who have purchased professional liability insurance this year have experienced itand the future is not bright for 2003! With rates up typically 15 to 25 percent in 2002, premium payments were up dramatically. (Premiums being your "rate" multiplied by your "revenues.") For firms that have been in a three-year insurance program with guaranteed premiums despite their growing revenues, the costs for coverage when they come off of that multiyear policy can be shocking. The good news is that even with the exit of Reliance, Westport and United Coastal, among others, from the A/E professional liability market, the major players, along with a number of specialty firms, are still writing insurance for architects. VOSCO/CNA, DPIC, Zurich, Lexington, RAMCO, Kemper, XL, Ace, and Lloyds of London are alive and kicking. There are even some new carriers in the market, such as Arrowhead/Liberty International. Annual survey findings Unfortunately, rates will be going up again in 2003almost universally. The actual percentage will certainly vary from firm to firm, but don't be surprised to see rate increases in 2003 of 15 to 25 percent. If your firm has annual revenues in excess of $5,000,000, you are likely to see rates going up even more than 25 percent. These increases are a function of a number of recent trends. Some good news Project policies, on the other hand, do not come with such good news. Although a few carriers still will quote them, most companies have either stopped writing these policies or have severely restricted projects for which they will write them. Though architects frequently consider project policies to be an excellent way to transfer risk, almost all of the insurance companies who were present felt that traditional project policies were not economically viable for them. It was interesting to note this year that there was a high level of consistency among the answers we received from the different companies. Though they were not identical, the trends were quite similar. Five factors that will impact your rates: Should you be concerned about these costs? Absolutely! Nevertheless, we are not seeing the level of premium increases and carriers dropping out of the market that we did in the mid-1980s, and it is important for carriers to avoid losing money on a long-term basis. If they don't make money, they will ultimately leave the market, and we will all be much the worse for lack of competitive coverage! As one of our meeting participants put it: "You need to be really
wary of those carriers who are not increasing rates when the rest of the
market is going up. Will they still be in business when you need claims
to be paid?" Copyright 2002 The American Institute of Architects. All rights reserved. |
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