I’ve Never Had a Claim, So Why Would My Rates Increase?

Liability insurance rates for legal professionals may be one of the more confusing aspects of practicing law. Understanding some key factors in determining rates may help ease your mind when it’s time to renew your coverage.

Experience Matters

Interestingly, experienced attorneys tend to pay more for malpractice insurance than their newer colleagues. This may seem counterintuitive, but consider the number of cases a veteran attorney has under his or her belt as opposed to someone just starting out. The line of thought here is that an attorney who has handled hundreds of cases represents greater risk than an attorney who has only represented a few, simply because of the increased exposure.

Insurers have developed a step rate factor. New attorneys start out at a rate factor of 1.0, and the factor gradually increases over time until it maxes out at a factor of 2.4. It usually takes about seven years for an attorney to reach the maximum rate factor.

The good news is that attorneys who have no other risk factors over that time should see no more than a 2–5% increase each year. If you are seeing a more dramatic increase, it may be a sign of poor underwriting practices, which means it’s most likely time for you to shop for a new insurer.

Number Crunching

Everything from the number of attorneys being insured to the number of claims you’ve had in the past can affect your E&O rates. Some examples include

• The number of attorneys in a firm being covered by the insurer. The more attorneys insured under your plan, the lower the per-attorney rate should be.
• The number of years in practice. Replacing a retiring attorney with a newly licensed attorney should lead to a drop in your firm’s rates.
• The level of risk associated with the areas of law you practice can seriously impact the rates your insurer must charge to cover your risk. Some areas of law, such as commercial transactions or personal injury, expose you to greater risk of loss than others, such as family law or mediation.
• The deductible amount. If you are willing and able to accept a higher deductible, then you could lower your premium payments. Just make sure you are able to cover the deductible in the event of a claim.
• Your number of past claims can have a substantial impact on your malpractice insurance rates. On the other hand, if you have a clean claims history, you can end up with credits that reduce your premium.

While you don’t have control over some of these variables, understanding how your rates are calculated can help you identify when it’s time to start looking for a new insurer.

If you are dissatisfied with your current professional liability insurance carrier, reach out to ProDefender today for a quote, consultation, or simply to discuss your options. Call us at (866) 434-8557, or email us at info@prodefender.com.