As at attorney and business owner you already know the importance of carrying professional liability insurance. This type of insurance affords the security and stability that is required for the growth and success of a business, especially a law firm.
Therefore, finding the right carrier to partner with you and your firm is essential to the growth, development, and well-being of your business.
Finding the right carrier goes beyond the price tag, while the premium cost is an important factor in the decision-making process, there are a few other factors to consider.
Size of The Carrier
When it comes to insurance carriers, bigger isn’t always better. Although there is a sense of security in choosing a larger carrier that has many insureds, there are a couple features that a small carrier has, that a large carrier simply can’t compete with.
One benefit of choosing a smaller carrier is being a part of a smaller risk pool. This is a fundamental concept of insurance; your premiums are based on the claims experience of the group or carrier in which you are pooled. While it’s true that a larger risk pool can equal a lower premium, it’s important to also be aware of who is in the risk pool.
Frequently, with larger insurance carriers, a wide variety of law firms are pooled together. If a program insures large, high-risk firms, they are forced to charge a higher premium to absorb the risk of those firms. The small firm or solo attorney is then stuck paying a higher premium to offset the risk of the larger firms. Smaller pools with less risky firms can greatly benefit those in smaller firms.
Another benefit to choosing a smaller insurance carrier is the level of service you receive. Smaller insurance carriers generally have the ability to provide specialized attention to their insureds. This can be very helpful during the renewal process. Rather than being transferred to many people or having to deal with phone recordings, you have direct access to the people you need to speak with.
Additionally, small firms tend to be more responsive when returning phone calls or emails. With a small insurance carrier, you are a valued insured rather than just another policy.
Experience of The Carrier
When choosing an insurance carrier, the carriers experience should play a role in your decision-making process. That being said, there is more to “experience” than just how many years the carrier has been in business. The A.M Best rating of the insurance company is a very clear indicator of their experience and trustworthiness in the marketplace.
A.M. Best ratings are a recognized indicator of an insurance company’s financial strength and ability to meet its insurance obligations. The stronger the financial strength of your insurance company the more likely it will not experience hardships or failure that will affect, you, the insured.
The A.M. Best rating scale ranges from “A++” to “F” and even includes “S”, for suspended. Much like a scholastic grading scale, “A” is the top of the scale and viewed as superior, while “F” is the bottom of the scale and deemed “in Liquidation”. Any rating below “B” is considered to be in a vulnerable state.
Many insurance companies will publish their rating on their website, especially if rated highly. If you are unable to find an insurance company’s rating, be sure to check the A.M. Best Rating website to be sure they are financially sound and have a positive outlook. When choosing an insurance carrier, it is wise to choose a carrier that is rated A and above.
Admitted vs Non Admitted Carrier
One of the most important characteristics of an insurance carrier is whether they are admitted or non-admitted. An admitted carrier is approved by the state’s insurance department. Meaning that they are required to comply with all state regulations and, furthermore, overseen by the National Association of Insurance Commissioners.
Being an admitted carrier creates a high level of accountability. The insured can sleep well at night knowing that if an insurance company did fail financially then the state is required to supplement the payments on any claims if necessary.
Alternatively, non-admitted carriers are not approved by the state which means that if you are with a non-admitted carrier, that carrier is not required to comply with state regulations. What that means is that if the insurance company is unable to pay debts owed, there is no guarantee that your potential claim will be paid. Furthermore, if you feel like the insurance company was incompetent, you will not be able to appeal to the state insurance department.
Choosing a Professional Liability Insurance Carrier
When deciding which professional liability insurance carrier is right for your firm, a desirable premium cannot be ignored. But, other factors such as financial soundness, claims handling, sensitivity to policyholders from a customer service standpoint should be considered.
The long and short is that you should do your homework, utilize your network, shop not only for premium sake but for policy and customer service. By doing that you will be able to hone in on what carrier will best suit your firm's needs.
