The Big Lie in Professional Liability Insurance

There is a big lie that continues to be so frequently repeated that I feel compelled to call it out.  The latest iteration is, “In today’s economy, you don’t want to be cutting costs on your professional liability insurance”, implying that in today’s tough economic climate, shopping or switching your insurance company is dangerous to your firm’s financial risk. 

Most common perpetrators of the myth?  Insurance brokers and other supposed expert risk managers.  Why?  Some brokers don’t know how or have the capabilities to shop the range of insurance companies and many brokers realize that it is more work for them (and likely less commission dollars too). 

Law firm Managing Partners are usually risk averse, so the myth is believed and opportunities are missed at firms.  Your administrative staff may also be too happy to accept this as they sometimes bear the brunt of the work needed for the shopping process.

Why should you do it?

Insurance companies’ underwriting guidelines are inconsistent year to year.  What was a “perfect fit” for them last year is no longer a good fit for their new philosophy.  There are currently more solid top rated, admitted insurance companies competing for your business today than in the past 15 years.

In a follow up post, I will answer the typical questions challenging my position on this.

But won’t the insurance companies not look favorably to our application when we really need them?

But won’t our current insurance company become hostile when they are told in the negotiation that we are entertaining other offers?

But isn’t the shopping process a lot of work for a low probability of actually moving?

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