Professional Liability Insurance issues impacting small businesses.
2020 was a year many called “unprecedented,” as we endured a global pandemic, natural disasters, and social and political unrest. Working remotely became the new normal, and face-to-face interactions became virtual. So what does 2021 have in store?
So far, we have ushered in a new administration, introduced new vaccines, and adapted our lives and businesses as best we can. In the realm of professional liability insurance, which protects individuals and companies that provide professional advice and services from negligence claims and lawsuits, we’re seeing a ripple effect from the drastic changes of the last year. These will continue to impact our business throughout 2021 and beyond.
The market continues to harden.
Even pre-COVID, the market was already hardening, which meant higher rates and less competition. Now with the pandemic and an increase in professional liability claims, insurers are raising rates. Insurance companies are being more selective now, and brokers are now tasked with “selling” difficult accounts to insurance companies. It is now common to find brokers submitting supplemental narratives to explain lessons learned from prior claims as well describe risk mitigation measures undertaken by the insured. Building strong relationships with customers and brokers is especially important as all parties must work collectively to find the best solutions.
Consultants go solo, boosting demand for individual coverage.
One trend we are seeing is an influx of professionals leaving larger companies and corporate settings to start their own independent consultancies. With technology making it easy to work from anywhere, these professionals are seizing the opportunity to be their own boss. Whether they are business consultants, lawyers, or accountants, they’re realizing that they have exposures for which they need to be insured. After leaving the corporate world, where they were covered under the company’s various insurance policies, they are now in need of their own insurance coverage – including professional liability insurance – for their new enterprise.
Remote work is here to stay.
As the nature of work evolves and employers figure out the policies surrounding the new normal — hybrid offices, vaccine requirements, remote benefits, etc. — employment practices liability insurance (EPLI) will be a hot growth sector. EPLI is a sort of catch-all that covers human resources and anything related to how companies handle employees. With so much changing and the potential for claims to arise from remote work — a lot of it being things companies do not see because they happen virtually now — we’ll likely see more claims around discrimination, wrongful termination, and even dangerous working conditions. In addition to growth in existing policies, remote work will spur the development of new types of coverage that are yet to be defined.
The pandemic will trigger delay claims for construction projects.
Another area under professional liability is Architects and Engineers. The pandemic has widely impacted the design and construction industry with just about every project experiencing some sort of delay. Time is money. While architects and engineers may not be directly responsible for delays in construction projects, we will continue to see a significant number of claims in this area. Whether it was stay-at-home orders that kept the labor away or issues with logistics that meant materials did not arrive in time, residential and commercial project interruptions will trigger a lot of finger pointing. Fortunately for design professionals, in addition to having little responsibility for the timing of project delivery, they also have the defenses of force majeure, Act of God and impossibility to assert as defenses.
Fewer coverage bells and whistles.
In the soft market conditions of the last decade or more, in addition to year-over-year reductions in rates, insureds and brokers also enjoyed ever broadening terms and ancillary coverages. Many policies expanded to provide supplemental coverage for crisis response costs or reimbursement for the costs of responding to a subpoena. Others lowered the insured’s deductible if a claim was resolved within a specified timeframe. Do not expect all these coverage enhancements to disappear. But also, don’t expect there to be more on the way. In these market conditions, insurers are looking at the “blocking and tackling” of insurance. That means focusing on the appropriate rate and deductible for the coverages offered.
Resilience and creativity are needed to make it through these challenging times. If insurers can see these trends as opportunities, then whether they are good or bad for business will be determined by how we respond to them. Every challenge is an opportunity to improve how we do business and, ultimately, how we serve our customers. Supported customers mean a brighter future for insurers, brokers, and businesses. By continuing to pay attention to how we evolve and grow our business, we can build the future that helps our industry move forward.