|
Claims, Insurance Options and Risk Profile
Robert D. Camilleri, CIC
Introduction
The design and construction industry can be very litigious for design firms. As an insurance agent specializing in design professionals, I have a number of clients that have had some type of Professional Liability (PL) claim filed against them in recent years. The causes vary - however many are attributed to actions taken during, and following the recession period of 2008 – 2011 by both the A/E firm, and project owners. This includes firms making decisions to obtain any work possible, and project owners trying to find funds for projects by filing claims. Many owners view A/E firms and their PL insurance policies as a cost recovery asset on projects.
Recovery & Claims
There has been a recovery the last few years for just over 50% of design firms based on a recent SmartRisk survey. Fifty two percent (52%) of firms obtained an increase 10% or greater revenue this year following a significant reduction during the recession period. Many firms had a revenue drop of 25% - 40% causing many to make difficult decisions to reduce operational expenditures - including laying off experienced senior staff, and excepting work at reduced fees under unacceptable contractual terms. These actions have lead to increased risk and claim activity for firms. Fifty percent (50%) of firms have had a claim filed against them in the past three years based on a recent SmartRisk survey.
For firms with claims, this can cause significant increases in premium and fewer carriers willing to offer insurance coverage. These are challenging situations for both the firm and agent where firms have been non-renewed by their current carrier with limited options from others based on the insurance carriers underwriting appetite.
Insurance Options and Risk Profile
In order to find insurance options for clients with claims, our agency searched for an independent method of evaluating risk management knowledge, and operation practices – and found SmartRisk, a risk and performance management consultancy for design and building professionals. SmartRisk conducts SR Risk Profiles that providing an in-depth analysis of business practices, operations, and risk management knowledge. The Pro10X process includes interviews with Principals and key personnel of the firm.
Firms receive a firm specific SR Risk Profile Tool Report with associated risk-ratings (low-moderate-high) by category. The firm’s strengths, areas of concern, and recommendations for mitigating future risk and liability exposures are identified. The firm also receives an SR Risk Profile Action Plan and Certificate of Completion for outlining their strategy for mitigating risk moving forward.
SR Risk Profile Benefits
One client with recent claims was non-renewed by their carrier, and was declined terms by several others. I finally found PL insurance for the firm, however with a significant increase in premium and deductible option. An SR Risk Profile is scheduled for this firm well before their PL renewal. Based on the findings, a risk management strategy will be developed, and actions taken to mitigate risk placing them in a better position for their renewal. Firms participating in the SR Risk Profile process have obtained very positive results including improved overall performance and profitability. Carriers that previously declined offering coverage are now offering terms with premiums below expiring, sometimes 10-20% lower creating a significant savings for firms. Certain insurance carriers offer a 50/50 cost sharing credit, and/or a loss prevention, risk management credit for qualified firms participating in the process.
Conclusion
Every design firm has different types and levels of risk, even if they are the same discipline, similar size, service offerings and project types. If a firm has had claims, it is essential to identify root causes, and associated elements that increase risk and the potential for more claims. The SR Risk Profile is a valuable risk analysis tool for that purpose providing recommendations for mitigating risk. It is also a great tool that increasing insurance options and lowering premiums for design firms.
Thank you,
Robert D. Camilleri, CIC
Camilleri & Clarke Associates An Affiliate of Smith Brothers
Director of Design Professionals' Practice
68 National Drive
Glastonbury, CT 06033
860.430.3306 Direct
860.652.3236 Fax
800.426.6946 Toll Free
Toll-Free Ext: 306
RCamilleri@camillericlarke.com
http://www.Camillericlarke.com
Free SmartRisk self risk indication: Free Self Risk Assessment Link
You are welcome to forward this newsletter to others who may be interested.
Thank you.
|
artRisk