Professional liability insurers for architects and engineers are planning to raise additional rates to keep up with costs, according to a new survey from professional broker Ames & Gough. increased compensation, a backlog of lawsuits, labor shortages, nd supply chain disruptions.
Ames & Gough said 15 out of 16 insurers – a key representative of the US market as a whole – plan to raise rates by 2023, with about half expecting the increase to be as high as 5%, and others expect an increase of 6% or more. About a quarter of the insurance companies surveyed are planning to raise their entire business books. Others plan to target high-risk projects like apartments and schools, or high-risk industries like structural engineering and geoengineering.
The reason is obvious, according to the respondent. Claim severity in 2022 increased for 75% of insurers, of which 88% cited social inflation as a major factor. Ames & Gough says an insurer has noted that claims payments have increased by 50% over the past decade.
“Today, insurers have to deal with daring plaintiff attorneys whose claimants don’t want to be injured,” said Jared Maxwell, vice president, and partner at Ames & Gough and co-author. settlements, ‘nuclear’ jury verdicts, and escalation settlements regarding both compensation and defense costs. of the survey. “When a design firm suffers large losses, especially as a result of exacerbated social inflation, the management of that company should engage with their broker and underwriter to understand possible claims. how it affects innovation and explain the steps they are taking to prevent a recurrence.”
The majority of insurers surveyed also reported paying out claims worth millions of dollars by 2022, with 38% paying claims of $5 million or more, including 13% paying claims between $10 million and $19.9 million. Many of the biggest claims involve what insurance companies consider high-risk projects or disciplines. They also include incidents that result in bodily injury, environmental impact or significant structural problems, or other errors and omissions that result in significant project delays and significant cost overruns.
Cady Sinks, assistant vice president, and partner, Ames & Gough, co-author of the report, said: “With most insurers planning to charge higher premiums to companies with higher premiums. With poor loss experience, design firms need to maintain a strong focus on sound risk management. survey. “This includes careful selection of clients and projects, careful selection and management of sub-consultants, effective quality control measures, due diligence on contracts, risk allocation, etc. appropriate contract risks and document timely communication with project owners and participants.”
