Rate predictions: Errors & omissions
| |
Trend |
Range |
| Large law firms |
 |
+5% to +10% |
| Mid-size law firms |
|
+5% to +10% |
| Management consulting firms |
|
+15% to +20% |
| Accountants |
|
+10% to +20% |
Key takeaway
As London markets are requiring cyber exclusions or endorsements on many professional liability policies to clarify coverage for silent cyber exposure, buyers need to understand their impact and to ensure coordination with any separate cyber policy in place, especially regarding third-party liability. Although U.S. markets are not yet imposing such cyber carve-backs, they will generally follow cyber coverage restrictions imposed by lead London markets.
The overlap of professional liability and cyber continues to be a focus in the E&O marketplace.
- As ransomware attacks have hit professional firms across all industries, insurers are increasingly concerned about silent cyber exposure.
- Underwriters continue to place more emphasis on coordinating cyber and professional liability coverages.
- London markets have now taken steps to require silent cyber exclusions. While this adjustment has not yet been widely seen in the U.S. and Bermuda, given the fact that Lloyd’s participates on most large law firm programs, we believe it is only be a matter of time.
Lawyers
- Firms with poor loss experience, areas of risk management weakness or historically low rates will see higher rate increases, while firms that are paying closer attention to what insurers deem rate adequacy should see rate increases ease and level off.
- While capacity is being carefully managed, it is still widely available to meet the needs of large law firms.
- Excess market carriers are being less aggressive on pricing due to increased competition.
- Primary carriers are continuing to press for higher retentions.
- Although insurers have been less inclined to offer policy wording enhancements, recent new market entrants and the increased competition they have brought, especially in excess layers, have helped buyers when negotiating coverages.
- COVID-19 and economic uncertainty continue to impact insurance renewals, with carriers often requesting additional information from existing policyholders and for new business. Professionals can expect questions on operations, financials, information security and even legal advice and contract provisions in the work-from-home era — which may outlast the pandemic.
- Rate increases increasingly vary firm to firm. Firms with poor loss experience, areas of risk management weakness or historically low rates will see higher rate increases. Better risks paying what insurers deem to be adequate rates will see lower rate increases. Increases may be in the 5% range for some firms.
Accountants
- Accounting firms are continuing to see increased rate pressure, and firms with losses are seeing premium increases in the 15% to 20% range. London markets are seeking higher premiums than domestics.
Consulting firms
- Underwriters are worried about the scope of services provided by consulting firms. There may be a pricing penalty for firms that offer a very broad scope of services.
- Premiums for management consultants are still being impacted by a very large claim payment made on behalf of a leading management consultant related to services provided to a pharmaceutical/opioid manufacturer.
Technology
- Evolving product and service delivery technologies are pushing the edges of technology E&O into other coverages, including general liability, cyber and other types of professional liability.
- Internet of Things (IoT) devices, especially, are interacting with people, property and equipment in ways that can create new exposures.
- New property damage and bodily injury liabilities have arisen from the use of monitoring services that run on IoT technology and connected networks. These new liabilities have led to further focus on contract requirements and interactions between insurance policies.
- Carriers remain hesitant to offer excess technology coverage on blended technology-cyber programs.
Errors and omissions (E&O), or professional liability, is arguably the most complex area of specialized insurance, with several distinct marketplaces:
- Stand-alone E&O for certain professions (lawyers, consultants, accountants).
- Technology E&O, sometimes stand-alone, but often coupled with cyber insurance.
- Miscellaneous professional liability (MPL), including those industries without a specific, dedicated policy form.
Disclaimer
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