A Claim and My Renewal Premium
How will the claim affect my Professional Liability renewal premium? This is a great question and will depend on a lot of factors involved including the outcome of the claim and your firm’s renewal application.
The claim may or may not have a factor in your renewal premium. It all depends on if the claim has been settled or if it is still pending. If there wasn’t an indemnity payment on the claim and very little defense was needed this may not have an affect on your renewal premium at all. On the flip side if there was an indemnity payment the insurance company will look at the overall claim. They will review how much of an indemnity payment was made the claim and how much were the defense expenses were involved with the claim. In most cases the insurance company will look at the total amount of the claim that includes the indemnity payment and defense to determine what is call a loss ratio. The loss ratio is the total amount of the claim and insurance premiums paid to the insurance company. Each insurance company has a different determination of what is a good loss ratio. Additionally, it is helpful to have a written description of the claim details and the lessons learned from the claim. These will give the insurance company an overall picture of what transpired with the claim.
Keep in mind when the insurance company is determining your renewal premium they not only look at all of the claim information provided but the overall renewal application. If you did have a claim this may just be on piece of the whole picture of your design firm. Other reasons your premium could be changing is due to billings increase, change in project types or discipline changes.
Remember that a claim may not be the only reason for a change in your premium, it may be the past fiscal years information as well. It is challenging to know how the claim will affect your firm’s premium until the claim is settled. Please be sure to review these changes in your premium with your insurance agent.