No matter what kind of insurance we’re talking about, it’s no secret that rates tend to creep up year after year. The increases may be small, but eventually, they add up. Professional liability insurance is one of the top three yearly expenses for small firms, therefore, it’s important to make sure you’re not overpaying. But, how do you know when you should be looking elsewhere for professional liability coverage?
It’s Been A While Since You’ve Shopped
As much as we would all like to believe that loyalty to our insurance companies will be rewarded with low rates, that’s often not the case. A common mistake many people make is thinking their price is fair simply because their rates haven’t gone up year over year. Competition in the insurance market can fluctuate dramatically, sometimes leading to lower rates across the board. When this happens, you don’t want to miss the boat. If you go several years without looking at other pricing, you may never realize there are companies willing to offer you the same coverage at a much lower rate.
You Haven’t Compared Policies in Awhile
Shopping for insurance isn’t always just about price. It’s also a very effective way to find out the differences in coverage options between companies. Most professional liability policies are fairly similar, but there are some small differences. You might get a quote from a company for matching limits and deductibles, however, the extensions of coverage could be very different.
Most companies will offer additional coverage limits for things like disciplinary defense and defendant reimbursement and those can often vary significantly. If you don’t get quotes from other companies occasionally, it’s hard to know how your policy stacks up against the rest.
You’ve Started a New Practice Area
Areas of practice are one of the biggest factors in premium cost. If your firm is starting to take on clients in new areas, your premium may fluctuate as a result. It never hurts to ask your current provider how your rate could change based on changes at your firm.
Another thing to keep in mind is that every company evaluates risk differently. If you receive a competitive estimate from another insurance company, it may be because they view your areas of practice as less of a risk to insure than your current provider does, therefore, resulting in a lower premium. A great way to save on premium is to do some groundwork to make sure you’re insured with the company that views your areas of practice most favorably.
You’ve Had a Change in Personnel
The number of attorneys and how long they’ve been with your firm have a significant impact on price. For example, a firm with two attorneys is likely to pay double that of a solo firm. It should be a red flag if an attorney leaves your firm and you don’t see a significant reduction in premium.
By the same token, if you add an attorney and your premium increases, it’s not a bad idea to make sure the increase isn’t unreasonable compared to what other companies are offering.
It’s also worth noting that due to prior-acts coverage, there will likely be a bigger increase from adding an attorney than there is a reduction from an attorney leaving. That’s because the policy is still covering the work that the departing attorney has done over the time they were at the firm. As a result, sometimes the decrease in premium will happen over the course of several years rather than immediately after the attorney has left.
You’ve Had a Claim
It’s no secret that having a claim can influence the cost of professional liability insurance. The good news is, just because you have a claim doesn’t mean you can’t shop for better rates.
Although it may be easier to cut your losses and renew, some companies will still quote your firm and often offer a more competitive price than the carrier that is covering your claim. This is especially true if you haven’t shopped for several years since you reported your claim.
Your current company has much less of an incentive to lower your rate or offer you a competitive renewal quote once you’ve had a claim. But, other carriers may be much more interested in your business.
The bottom line is there’s very little downside to pricing your professional liability insurance. It does take time and effort, but with increased competition in the marketplace, there are more options than ever for you to save on coverage. Even though there’s no guarantee you’ll find a better premium out there, at the very least you’ll have peace of mind knowing that the rate you’re getting is fair.
