Insurance Marketplace Realities 2024 Spring Update – Errors and omissions

Rate predictions: Errors and omissions

	Trend	Range
Large law firms		+2% to +8%
Mid-size law firms		Flat to +5%
Management consulting firms		Flat to +15%

Lawyers

• The market is continuing to stabilize. Although excess carriers continue to seek rate, most primary carriers are reaching rate adequacy and moderating their premium targets depending on the size of the firm, areas of practice and claim history. However, several new, large claims in the market are causing some insurers to increase their claim inflation factor.
• Excess markets continue to see claims penetration and are working to correct their historically low premiums. Many excess markets are using recalibrated models which are pushing up increased limits factors, especially for first and second excess layers as well as reducing capacity deployed on any program.
• Carriers are continuing to push for higher retentions and using a firm’s revenue as a basis for this increase.
• Underwriters are paying particular attention to the following:
  • Financial stability of law firms, including the potential impact of inflation/recession on law firm economics
  • Law firm’s controls over the use of artificial intelligence
  • Cyber controls including migration to the cloud
  • Firm’s business with entities in sanctioned countries
  • Impact of outside counsel guidelines and possible indemnifications within law firm agreements
  • Managing client selection and lateral hire exposures

Consulting firms

• Underwriters have continuing concerns with consultants working with clients in the tobacco and opioid industries, especially when crossing the line into proposing or operationally supporting high risk strategies for regulated or high-risk products.
• Similar to law firm underwriters, consultant underwriters are paying close attention to insureds that are working with governments under sanctions.
• Some markets that offer consultant E&O coverage believe that it has been underpriced and continue to strive for rate adequacy, particularly in light of recent claims severity.
• Underwriters are focusing on:
  • Cyber controls
  • Practice focus – Turnaround management, cryptocurrency and pharmaceuticals are not favored
  • Strong financials
  • Strategic plans to address potential downturns in the economy
  • Ensuring consultants working with sanctioned governments have the appropriate licenses are in place before the consultancy is operational
  • Controls to ensure effective use of artificial intelligence

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 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

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Contacts

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Geoffrey Allen

Head of Professional Services Practice

email Email phone +1 818-915-4311

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Jason Krauss

FINEX NA Cyber Thought & Product Coverage Leader

email Email phone +1 212 915 8374

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