Insurance broker Ames & Gough recently released a report that revealed a large majority of Architect and Engineer insurers are anticipating modest increases in premium rates this year. This will make 2015 the third consecutive year that Architect Liability premiums have risen. Why is this?
According to a recent Insurance Journal article, insurers are keeping a close eye on the factors that are driving up claims costs, and thus increasing premiums. While claim frequency remains relatively unchanged, the size of those claims has increased; as much as 43% higher claim severity last year than in previous years. 36% of insurers surveyed cited increase defense costs as the emerging cost driver.
In addition to defense costs, insurers claim rate changes are a result of different types of projects, historic loss experience, recent claims experience, and the type of service that these architects and engineers provide. Insurance professionals recognize that as the economy improves, architects and engineers are looking to expand their business, and in doing so take on projects that underwriters view as higher risk.
How can you best advise your clients to ensure they are adequately covered but still maintain affordability with their premiums? These architects and engineers should understand how client selection may affect their risk profile and insurance costs. Sound overall risk management and review of their contractual agreements with these clients is key.
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