After a decade of declining rates, the professional liability market is beginning to see rates harden in certain segments including directors & officers, cyber and general liability.
After a decade of declining rates, the professional liability market is now experiencing a hardening of rates in certain segments of the market. With pressure building over the past 12 to 24 months, particularly in packaged lines such as directors & officers, cyber, and general liability, the market continues to be affected by the pandemic sweeping the globe.
“The most impacted sectors of professional liability should expect double-digit rate increases, while most other sectors should expect single-digit rate increases through year-end and into 2021," says David Egosi, head of professional risks, Hiscox.
“We're seeing a lot of activity in the lawyer's professional market, especially small to midsize firms, and the same with accountants, some of it due to the claims activity, some due to a shrinking in the market for the small practitioners," says Manny Cho, executive vice president, RPS Executive Lines. “Some of it, quite candidly, is due to the losses that people are seeing in that space."
“There's a lot of different classes that are seeing a lot of different things when it comes to rates," Cho says. “As an overall statement though, the market for professional liability is not soft anymore. It is harder. We are seeing increases across all classes of business today and I would expect that to continue throughout the year."
Carriers are taking pricing action in underperforming segments and lines of business such as D&O and employment practices liability insurance, as well as in construction and engineering liability lines that have been trending poorly over the last few years. “The events of 2020 with COVID-19 and the economic fluctuation are increasing exposure for some professional firms, creating new causes of action and claims along with the potential for increased severity," says Steven Barbal, managing director professional liability, The Hartford.
Coverage limitations “are noticeable in the professional fields where there might be some contingent bodily injury and exposure," Cho says. “So, in the allied medical field we are really looking at a lot of carriers looking to pull that back by either sub-limiting it or taking it away altogether."
Overall, the medical professional liability segment is experiencing higher medical malpractice insurance rates, with long-term care facilities being impacted by increased claims frequency and severity, as well as high jury verdicts.
The professional liability market incorporates a wide variety of risks and coverage tends to be tailored or customized to specific sectors. While not all segments within the market are experiencing a hardening of rates, current trends are being felt worldwide.
“We are not yet seeing sizable rate increases across our specialties, but headwinds from the global impact of COVID-19, mounting property losses and financial lines claims are beginning to influence the professional liability landscape," says Zach Vollmer, senior vice president, real estate errors & omissions, Victor Insurance Managers Inc.
Even though there is a lot of disruption and uncertainty in the market, “capacity remains strong in most of the miscellaneous professional categories and we even have some new entrants into the market, which is positive," Cho says. And with new entrants come new opportunities, particularly within the larger risks and fringe classes of business.
“Emerging sectors such as telehealth will be a growth area during the next 12 months," Egosi says. “We are also seeing more artisan contractors purchase professional liability coverage to close coverage gaps left by their general liability policies, such as pollution liability and faulty workmanship."
For many businesses, changes that were expected to take place over several years have taken place over the past number of months. Front and center is the digital migration that has accelerated rapidly due to COVID-19, impacting nearly all segments of the market.
“Agents can leverage these platforms to grow their businesses more efficiently," Egosi says, “but equally should recognize their limitations both in terms of scope and flexibility, as well as recognize the potential for breach exposure that is enhanced by working remotely."
Olivia Overman is IA content editor.