Sometimes when we are asked to review a firm’s professional liability insurance programs, there is nothing wrong with the existing policy language but upon further review, we uncover that it’s COMPLETELY wrong for THIS firm. This is the top 5 square insurance programs for round firms:
1) It’s way too expensive. The premium seems ok (average) at first glance but after further review, we find a well-run firm with an excellent claims history with a low risk practice profile. Average premiums for them is way more than they should be paying.
2) The layer structure is all wrong. There are various ways to layer policies but all methods need to be quoted annually. In situations where quota share make sense, layering will come out more expensive and lacking in coverage coordination. Rule of thumb – more than 20 million should be quota share. Under 20 million should be layered.
3) It’s the wrong deductible structure. Low deductibles frequently make sense for firms that have lots of little nuisance claims. The low deductible transfers the claims administration and risk on the multiple losses to the insurer. Conversely, a firm that rarely has claims that purchases a low deductible is likely wasting premiums.
4) The application is misleading. The insurance application is technically correct but far too vague for the insurer to have a correct understanding of the risk and related premium that needs to be collected. Common errors are with litigation firms and corporate securities work. Both areas of law, while technically the same area of law, can have very different risk profiles and related premiums.
5) Not enough coverage. The limit is enough for the average firm, but the firm is above average in its limit need. They might handle large transactions, large and complex cases.
Your professional liability insurance program needs to be customized by a broker who can create the best possible program for your firm. Off the shelf products as exampled above, lead to overpaying and inadequate insurance in your times of need.
