Professional liability is a specialized product that requires agents to spend time building an offering that addresses each insured's specific needs. Here are three tips to offer specialized coverage.
Prior to the coronavirus pandemic, the professional liability market was firming across most lines of business due to loss severity. Over the past 18 months, as the economy experienced widespread layoffs, bankruptcies and cyber breaches stemming from the COVID-19 pandemic, the market was adversely impacted even further.
“Some segments, such as healthcare, education and public entities have become very difficult to place," says Elizabeth Whitney, senior vice president, head of agents U.S., Swiss Re Corporate Solutions. Additionally, “the directors & officers segment was one of the first professional liability lines to harden starting in 2019—and with the onset of COVID-19, capacity has left the market after decades of soft market pricing and increasing loss ratios."
In 2021 and into 2022, “the major concern continues to be the financial condition of the insureds and whether they will be able to recover and survive," says Manny Cho, executive vice president, executive lines, Risk Placement Services.
“Professional liability is a specialized product and requires agents to spend time building an offering that addresses each insured's specific needs," says Sarah Medina, president, professional liability, The Hanover Insurance Group Inc. “Helping clients understand their exposures and the benefits certain coverages offer their businesses is critical."
“Oftentimes, the right coverage is not the cheapest, but it will help ensure financial and reputational stability for the client, and ultimately help them secure the long-term success of their business," Medina adds.
Here are three tips to offer specialized professional liability coverage:
1) Understanding the state of the market. “Agents need to be aware that the commercial market is very fluid right now," Whitney says. “They need to stay up to date with which carriers are restricting terms and conditions, capacity, and increasing rates."
In certain segments, such as contractors professional liability, “there are considerable variances with the available coverages given that most—if not all—carriers in this market are writing business on a non-admitted basis," says Chris McQueen, senior vice president, Berkley Construction Professional, a Berkley Company. “This means every agent, broker and policyholder must pay very close attention to the policy's wording and language. Every word counts."
Currently, the construction industry is leaning more heavily toward the residential sector. Agents should be aware that “carriers have been more selective and restrictive regarding the type of residential construction risks they've been willing to cover in the past," McQueen says. “It will be interesting to see how the current marketplace responds to the growing insurance opportunities and enhanced risks associated with residential building."
Cyber will continue to play a dramatic role in the professional liability markets and is considered particularly problematic in certain lines.
“We are seeing a dramatic shift right now in the schools and public entities space for cyber, especially for larger school districts and public entities," Cho says. “This change is driven by large losses, large loss potential and many of the stories we hear today about large cyber breaches. Many carriers are pulling out of this market completely or are only willing to offer limited capacity and then over very high attachment points."
2) Looking toward a new normal. As the world opens up, there are likely to be changes in almost every market brought about by the events of the last year. “We are likely to see many services providers adopting a virtual model, such as attorneys, accountants, and many other types of consultants," Medina says. “This model will present new risks and require agents to understand the new exposures and how to address them through the placement of appropriate coverage."
However, there are real opportunities for agents to help with risk management and risk mitigation going forward.
“As the country begins to reopen and companies start to establish their return-to-work procedures, how firms manage remote and hybrid work environments, mask mandates and social distancing measures county by county and state by state for multi-location entities will be challenging," Cho says. “There is also the issue of whether companies will ask or have the right to ask about or make vaccinations a requirement of coming back."
3) Obtaining the best outcome for clients and agents. A firmer market requires agents to pre-plan to get the best coverage for their clients. Providing accurate and detailed information to underwriters is key.
“Agents should give themselves plenty of lead time at renewal and be sure if they are changing carriers that they communicate in writing to their clients the differences in coverage," Whitney says. “Utilizing checklists and diligently documenting their files and communicating with their clients is essential to avoid errors & omissions claims."
Olivia Overman is IA content editor.