Insurance Marketplace for Architects and Engineers

1. Provide broader coverage
2. Provide superior claims handling
3. Provide exceptional risk control
4. Provide a lower price

 The policies offered by experienced underwriters are as broad as they have ever been, it is difficult if not impossible for a new company to provide a significantly broader policy form.  In addition most new entrants don’t have the volume to justify in house, experienced, specialized claims adjusters.  As such they have to sub out their claims to Third Party Administrators (TPA’s).  While some TPA’s are qualified, many are not experienced with the design profession.  Similarly, new companies have not had the time to develop risk management programs, or are not inclined to. This is a reflection of the fact that Risk Management takes a substantial commitment of time, money and expertise.  

 So if you can’t compete on 1,2 or 3…that leaves price.  This is exactly what some of the new players are doing.  They are pricing their coverage 20-25% below the experienced underwriters.  Unfortunately, they are not underwriting 20-25% better.  It is only a matter of time before the losses catch up with the premiums.  Unfortunately since Professional Liability is a long-tail business (claims are not usually paid until years after the premiums have been accepted) it can take a long time before a company realizes they have underpriced their product. 

 But why wouldn’t a design professional switch to one of these “newbies” to save some money?  After all, they can just switch back if these companies withdraw from the market.  Unfortunately that is not always the case.

• Although price is extremely important, especially in tough economic times, you are buying insurance to protect your company if you have a claim.  As mentioned above the quality of some of the new players leaves a lot to be desired…who do you want protecting the financial future of your company?  An experienced claims adjuster or some random claims adjuster who can’t spell “architect” or “engineer”?
• If a company does exit a line of business or goes out of business, the quality of personnel dealing with your existing claims is going to drop off also.
• Finally, we are heading in to a hard insurance market.  Coverage is going to be more expensive and more difficult to get.  Companies that abandon their “preferred markets” will be closely underwritten and may not be welcomed back with open arms.

 Many of these “new” companies will not be around long, so it is prudent to evaluate a prospective insurer on factors besides price, such as their commitment and experience in the industry, claims handling abilities and risk management offerings.  You should also consider the qualifications of the broker you deal with.  An experienced broker who specializes in the design profession can work with you to lower the frequency and severity of the claims that ultimately drive your premium costs.