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Insurance Update - A Safety Net When Things Go Wrong
Professional liability (PL) insurance, also called Errors and Omissions (E&O) plays an important role supporting design firms risk management program. It is essential that risk management strategies are implemented into the culture and operational practices of a firm - and when there is a problem, insurance is a safety net to help mitigate the risk.
Each year members from American Counsel of Engineering Companies (ACEC), American Institute of Architects (AIA), the AIA Trust and the National Society of Professional Engineers (NSPE) surveys and interviews select carriers on the status and changes in the insurance industry. Observations from committee members and insurance industry professionals are provided in the January – February issue of
Engineering Inc.
With more than 50 insurance carriers supporting the specialized A/E insurance market segment, there is an enormous amount of capacity (amount of available insurance). This is an advantage for A/E firms. The disadvantage - selecting a carrier can be more difficult with variations of program features.
A/E PL insurance is a specialized market segment and there can be significant differences between experience, policy features and services offered by carriers. Firms are cautioned, and suggested to apply the same evaluation process selecting an insurance carrier they would use for any other business partner. Firms should look well beyond just the cost of the insurance (premium) – and also evaluate other vital characteristics when selecting a carrier.
The following identifies key categories that should be considered when selecting a carrier. When selecting an insurance provider, the best approach is using the same “
quality selection process” when selecting sub-consultants, or design firms would like clients to apply when selecting project team members.
Financial Stability - Assess financial strength by A.M. Best Company, Standard & Poor’s, Fitch Ratings, and Moody’s Investors Services. Look for ratings - under watch, or have a positive or negative outlook.
Underwriting Staff - A/E is a specialized segment with a limited pool of experienced, knowledgeable A/E underwriters. Knowledge of A/E firms and professional liability (PL) insurance is critical. Look beyond the product-line manager for underwriters with more than 10 years experience in the A/E PL segment. These are the individuals that will be making the decisions when underwriting your account.
Coverage Features - Insurance policy and coverage features can vary greatly. Certain carriers specify coverage features while others indicate there policy offers more coverage with less stated in their policy language. Do not just read the marketing material and brochures provided by the carrier.
It is important to work with an insurance professional to evaluate coverage specifically exclusionary language (more info below). Marketing material and policies may identify "highlights" in one section then they are removed or limit coverage in your policy.
Claims Management - Experience in the A/E PL marketplace is critical for claims managers along with the selection used for local panel counsel. When things start going wrong, you want someone that knows the A/E business, in your local region to help handle a claim situation.
Pre-Claims Assistance: This service assists firms when things “may” be going wrong or when assistance is requested when no formal claim has been made. This is an important service option that should be offered at “no cost” to insured’s. The quality and capability of this service is based on the carrier’s claims experience and practices, which can vary widely.
Specialized A/E Insurance Agents and Brokers: One of the best practices for firms is working with an insurance agent that is specialized in the A/E industry. Two retail agent networks that specialize in offering insurance across the country with agents supporting specific states and regions -
PLAN and
AE ProNet. For wholesalers,
CRC,
Program Brokerage and
RT Specialty.
Conclusion
A/E firms are advised to make risk management a priority that includes the selection process of your professional liability insurance carrier. Professional liability insurance is a vital part of any firms operations and should not be viewed as only a " line-item" expense. When selecting your insurance provider, ensure your use the same quality selection process you would use for any other business partner.
You are welcome to forward this newsletter to others who may be interested.
Thank you.
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