Insurance Marketplace Realities 2023 Spring Update – Errors and omissions

Rate predictions: Errors & omissions

	Trend	Range
Large law firms		+5% to +10%
Mid-size law firms		Flat to +10%
Management consulting firms		+10% to +20%

Lawyers

• The market is beginning to stabilize. Although carriers continue to seek rate, most are reaching rate adequacy and moderating their premium targets, depending on the size of the firm, areas of practice and claim history. Some insurers are increasing their claim inflation factor due to the rising cost of defense and the upward trend of settlements.
• Markets have been seeing significant claim penetration beyond primary layers, which is impacting one or more excess layers. These excess insurers are still working to correct their premiums, but not as aggressively as in the past several quarters. Many excess markets are using recalibrated models which are pushing up increased limits factors. This has resulted in a compounding effect on year-over-year rate increases when combined with primary layers price correction.
• There are several new law firm professional liability markets with experienced underwriters that are creating competition on both the primary and excess levels. New markets tend to enter at or near the top of rate cycles.
• Carriers are continuing to push for higher retentions and using a firm’s revenue as a basis to do so.
• Underwriters are paying particular attention to:
  • Financial stability of law firms, including the potential influence of inflation/recession on law firm economics
  • Remote work environment’s impact on law firm’s abilities to properly supervise/impose risk management controls
  • Managing client selection and lateral hire exposures

Consulting firms

• Underwriters have continuing concerns with consultants working with clients in the tobacco and opioid industries, particularly with consultants potentially crossing the line into proposing or operationally supporting high-risk strategies for regulated or high-risk products.
• Similar to law firm underwriters, consultant underwriters are paying close attention to insureds that are working with governments under sanctions, and they have plans in place to address these situations.
• Several markets that offer consultant E&O coverage believe it has been underpriced for several years, and they are still striving for rate adequacy. This is due in part to the increased severity in consultant claims.

Technology

• Evolving product and service delivery technologies are pushing the edges of technology E&O into other coverages, including general liability, cyber and other types of professional liability.
• Internet of Things (IoT) devices are interacting with people, property and equipment in ways that can create new exposures.
• New property damage and bodily injury liabilities have arisen from the use of monitoring services that run on IoT technology and connected networks. These new liabilities have led to further focus on contract requirements and interactions between insurance policies.
• Carriers remain hesitant to offer excess technology coverage on blended technology-cyber programs.

Errors and omissions (E&O), or professional liability, is arguably the most complex area of specialized insurance, with several distinct marketplaces:

• Stand-alone E&O for certain professions (lawyers, consultants, accountants)
• Technology E&O, sometimes stand-alone, but often coupled with cyber insurance
• Miscellaneous professional liability (MPL), including those industries without a specific, dedicated policy form

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Contacts

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Geoffrey Allen

Head of Professional Services Practice

email Email phone +1 818-915-4311

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Jason D. Krauss

FINEX NA Cyber Thought & Product Coverage Leader

email Email phone +1 212 915 8374

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