Professional Liability Insurance FAQ’s
When should you shop the insurance?
While it is usually not wise to “shop” your insurance every year, but people that do shop their insurance generally pay between 10 to 20% less for their insurance then a comparable insured that has not shopped for a number of years. So if you have seen increases in your insurance costs or have not look at other companies in awhile, you could be paying 10 to 20% too much for your insurance. Unlike personal lines insurance, insurance carriers for Professional Liability Insurance have some discretion in the rate being charge for each individual insured.
I have never had a claim, why is my insurance going up?
For almost 10 years the price of professional liability insurance declined steadily as many insurance carriers entered the professional liability market place and attempted to gain market share. Reinsurance rates were generally very cheap and easy to obtain. Approximately 2 years ago, this trend started to change. Certain insured’s with specific areas of practice or insured’s with claims were starting to find insurance costs going up or not being able to find coverage. The tightening insurance market had already started prior to September 11th. After September 11th, the insurance markets started to tighten even faster. Only one insurer that I know of does not purchase reinsurance (State Farm) because they are so large. All of the others to spread the risk of insuring everything purchase reinsurance. Most reinsurance treaties are annual. As the reinsures absorb the losses for 9/11 and paid the cost for the cheap reinsurance rates and liberal underwriting of the past, they past on increases to the primary insurance carriers. The primary insurance carriers have then passed these costs and heightened underwriting standards along to the ultimate consumer, you. If the declines in the stock market continue through the end of the year, expect another round of price increases and further tightening of the insurance market place as insurance carriers investment portfolios which are counted on to cover some of the costs of insurance have all declined.
How can I lower my insurance costs?
One is to shop your policy with competitors and see if you can save some money. If you do not wish to shop, or even if you shop and cannot find a better deal, look at higher deductibles, eliminating add-ons like 1st Dollar Defense. Resist the temptation to lower your limits. Remember that even if your practice has changed, if you lower your limits, a claim occurred a number of years ago that is reported or made in the current policy year will be settled with the current policy limits and policy terms. A higher deductible payment might “hurt” but an underinsured loss may expose your personal assets.
When switching Insurance Carriers, what should I do?
It is good practice at each renewal to inquire with all partners, principals and employees to make sure that they are not aware of any circumstances that could lead to a malpractice claim. If they are it should be reported to your current carrier, even if you do not change carriers. The same holds true if you are switching carriers, because even if you do not switch carriers, failure to make a timely report of a claim can cause a claim to be denied. You can read more Professional Liability Insurance FAQ’s on our site at http://www.mcisinc.us/business_insurance/professional_liability_insurance.html
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