How professional liability policy premiums are determined for architects/engineers-
There are many factors in determining the premium for professional liability and many of those factors will start with the professional liability application.
The professional liability application provides many details for the underwriters at insurance companies to determine the new or renewal premium. One of the primary premium drivers are your firms billings. The insurance companies use averages of the past billings to help to determine the premium. A few insurance companies will also consider your projected billings in the averages.
The services you firm offers are also a factor in determining the premium. For example, a structural engineering will typically have a higher rating than an architect will. Your sub consultant’s services are not a premium driver, just your firm’s services provided. However, the application will ask about your sub consultant practices and risk management of those consultants.
The project types also help to determine the premium for professional liability policies. Condominium projects have a very high risk for architects/engineers. While commercial office spaces tend to have, a lower risk and therefore the premium may be lower.
Insurance companies will also look at your firms overall risk management practices and this may provide a credit on your firm’s premium. Some of the risk management practices are peer reviews, contract use, contract types, continuing education, limitation of liability contract clause and fee dispute clause.
A large factor in determining a renewal premium is claims history. The amount of claims and/or the amount paid out on claims can affect the premium. On the other hand, if your firm has a clean claims history this can also help in the premium. If your firm does have a claim, it helps to provide lessons learned narrative of the claim to the insurance companies; this may also help with the premium.
The insurance companies may also review your firm’s website, resumes of principals, brochures or financials. These also help to determine how an insurance company generates the premium.
If you have any questions about how an insurance company determines your firms professional liability premium please call or email your Professional Underwriters agent for assistance.