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Professional Liability Pricing Seminar Insights

Understand the nuances of non-medical professional liability pricing with key data and rating factors shared by Stephen Kantor. Learn about application types, market dynamics, and factors influencing pricing.

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Professional Liability Pricing Seminar Insights

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  1. CAS Ratemaking Seminar Non Medical Professional Liability Pricing Stephen Kantor, FCAS, MAAA March 7, 2002

  2. Data Issues • Buried within Annual Statement • Often controlled by producer • Difficult to look at industry data • Need specific filing information • Impact from surplus lines Fireman's Fund Interstate

  3. Typical Rating Factors • Step rate • Area of practice • Size of firm • State/Territory • Claims history Fireman's Fund Interstate

  4. Initial Pricing Often Shopped By Producer • Has certain price in mind • Based on current carrier • Limited data available Based on Competitor • Look at filings • Read the market Fireman's Fund Interstate

  5. On Going Pricing Premium and Loss Experience • Sparse • Green • Volatile Can you combine with other programs? Can you compare to industry data? Fireman's Fund Interstate

  6. Two Distinct Application Types • Flat Price • More complicated Fireman's Fund Interstate

  7. Flat Priced • One size fits all • “Cash with APP” • Application asks 4-5 questions which basically ask • Is this a typical risk? • Any claims? • Often Association sponsored Fireman's Fund Interstate

  8. Lawyers • State/Territory • Step rate • Area of practice • Size of Firm – number of lawyers • Claims history • Deductible • Defense outside limit • Other factors often built in to IRM Fireman's Fund Interstate

  9. Lawyers Area of Practice % of Practice Credit/Debit Entertainment 1- 10 0% 11-20 +5% Over 20 +10% Real Estate 1- 5 10% 6-20 +5% 21-50 +10% Over 50 +20% Fireman's Fund Interstate

  10. Lawyers Area of Practice % of Practice Credit/Debit Litigation Defense 1- 25 -5% 26-50 -15% Over 50 -33% Litigation Plaintiff 1- 25 0% 26-50 +5% 51-60 +10% 61-75 +15% Over 75 +20% Fireman's Fund Interstate

  11. LawyersSize of Firm Number of Lawyers Credit 1-5 0% 6-10 5% 11-15 10% 16-20 15% 21-25 20% Over 25 25% Fireman's Fund Interstate

  12. LawyersAn Example Credit/Debit Area of Practice Litigation Defense 30% -15% Litigation Plaintiff 40% +5% Real Estate 15% +5% Other 15% 0% Size of Firm 12 Lawyers 10% Limit $1,000,000/$1,000,000 1.85 Deductible $5,000 .15 Claims Experience 1.15 Step Factor Step 2 1.40 (Base Rate) X (1.85 - .15) X (.95) X (1.10) X (1.15) X (1.40) Fireman's Fund Interstate

  13. Real Estate E&O Based on Agency Revenue and Number of Licensed Agents • Some States Mandatory • Expect better experience • Usually good experience data available • No IRM • The best realtors ask the right questions • Loss only deductible work against insurers • Claims often occur when agent represents both Buyer and Seller • Mold is new claims issue – failure to disclose • Discussions occurring on mold exclusion • Still competitive marketplace Fireman's Fund Interstate

  14. Massage Therapist • Sponsored by AMTA • Insurance is automatic – part of dues • One size fits all • Certification required for membership • Few carriers Fireman's Fund Interstate

  15. Non Profit D&O • Based on Expense – how much $ Association takes in • If expenditures > revenue • Look for positive fund balance • Endowment • EPLI is important Fireman's Fund Interstate

  16. Accountants • Revenue based • Risk management drive Accounting Malpractice.com (Mark Cheffers - the Enron expert) • Competitive market • Suits for fees • Shared office space • Engagement and disengagement letters crucial Fireman's Fund Interstate

  17. Accountants Areas of practice have expanded over past 5 years • Financial planning • Management advisory • Elder care ( Financial and Healthcare) Consulting • Has made underwriting more difficult • Audits have greater exposure than bookkeeping Fireman's Fund Interstate

  18. Accountants How will Enron affect the industry? • Opinions vary • More careful underwriting Audits used in SEC Filings Consulting And Auditing Fireman's Fund Interstate

  19. Public Officials/Public Entities • Population of city • Tax revenues/Tax base • Proximity to large cities • Balance between revenue and expenses • Power plants/libraries/school districts • Lots of EPLI • Competitive market Fireman's Fund Interstate

  20. Teachers Rate is on Per Head Basis • Completely Association driven • Can cover “Failure to Educate” • Will this be the next claims black hole? • Covers extra curricular activities Fireman's Fund Interstate

  21. Title Agents • Billings/Revenue • Several large Title Companies • Mis-handling of Escrow Accounts - drives many claims Fireman's Fund Interstate

  22. Cash with App Shorthand Reporters • Association of Court Reporters Interior Designers • Most claims either wrong fabric or the couch doesn’t fit Fireman's Fund Interstate

  23. Convention Cancellations • Rated on revenues expected to be raised • Insurance covers the shortfall on revenues • Became a big issue after 9/11 Fireman's Fund Interstate

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