Press Coverage

16 csengineermag.com august 2019 Every architecture or engineering firm faces the same question annu- ally: in today's professional liability (PL) insurance marketplace, how do you determine which program is right for your firm? How do you bring a high level of consistency and quality to a decision that impacts your business year after year? Who will be the right partner for your firm? As the CEOs of multi-disciplined firms tasked with purchasing our PL coverage, we've learned to place value first, followed by cover- age options, insurer experience and capabilities and, finally, cost. We believe this approach has largely insulated us from the uncertainty and volatility in the insurance marketplace. In talking to our colleagues, we realize that many find the PL market increasingly challenging to navigate, so we thought it might be worthwhile to share our thoughts on the subject. We've watched as dozens of new insurance companies entered (and exited) the PL marketplace over the last 25 years, all vying for our business. Some of these new carriers offered bargain-basement prices – at least for the first year. But when we looked closely, many carriers lacked the support, infrastructure and experience that would help us navigate disputes specific to the design industry, educate our staff, and remind us where the real risk lies in our business. In fact, over time, many have demonstrated a lack of commitment to keep the design profession as a line of business, entering and leaving the market when it was prudent for them to do so, and leaving the insured without their support. Predictably, when the claims caught up with their pricing, these carri- ers often raised their rates without a corresponding increase in service or support. Some got out of the PL business entirely. During our tenure in the business, over 50 insurance companies have left the A/E mar- ket. And a lot of our design professional colleagues who chose their insurance based mainly on price ended up paying more down the road. We've seen friends in the situation of having their insurer exit the mar- ket, and scramble to find a new carrier while in the midst of a claim. Defining Value What does this mean for A/E firms that are buying professional li- ability coverage today? As we mentioned, we've learned to make the decision based on value. To us, this means we consider the benefits we derive now as well as those we'll see in the long run – even if we don't file a claim. Instead of thinking of PL insurance as an expense, like utility bills, we consider it an investment. We learned a long time ago that there's a difference between the cost of insurance and the cost of risk. While we have relatively little control over the cost of insurance, we can influence our cost of risk. So, we look for a carrier that helps us manage that risk and support our company's risk management goals. We liken our decision-making model to qualifications-based selection (QBS). Our clients select us based (we hope) on our experience, skill, knowledge, and stability; we use the same criteria for our professional liability insurer, and believe those criteria apply, regardless of the size of the design firm or insurance carrier. So, what do we look for? Of course, the insurer must be a financially stable, well-capitalized entity with consistently high credit agency rat- ings. That's a given. But it's also critical that the insurer maintains the desire and ability to manage insurance cycles, and will offer us predictable coverage terms and ongoing support regardless of our claims experience. We want an insurer that is willing to work with us to provide coverage broad enough and flexible enough to meet our needs, one that offers the limits, deductibles and coverage options my firm requires. It's crucial to us that our professional liability insurer specializes in serving our profession with a legacy in the A/E market. But these days, you have to know where to look to find these insur- ers, and your agent or broker owes it to you to help. Many good A/E insurers have been acquired by new parent financial companies. These programs have been around for years and they're run by specialists in A/E risk. Still, if an insurance company has been recently acquired through a merger or acquisition, you'll want to know if the new parent company is committed to their A/E program, if they're investing in it, and if they're keeping key personnel and programs. It Only Takes One Claim To us, great claims handling is a deal-maker. You only need to be in- volved in a single claim to understand how critical this is. We want to work with claims people who understand our business and who specialize in our type of disputes. We don't want to have to explain what we do in our profession to someone who also works on life insur- ance claims. And we want to know how experienced their claims staff is, whether they are licensed attorneys, and if they specialize in A/E defense or are simply general adjusters. Experience, Knowledge, and Stability Value Beats First Cost When Buying Professional Liability Insurance By Roger L. Ball, PE, FACEC, and Cara Shimkus Hall, FAIA

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