Insurance Marketplace Realities 2023 – Errors and omissions
December 1, 2022
As insurers continue to correct rates to better align with long-term loss experience trends, the magnitude of the increases is decreasing at the primary layer level but not yet at the excess level.
Financial, Executive and Professional Risks (FINEX)|Cyber Risk Management
Rate predictions: Errors and omissions
Large law firms
+5% to +10%
Mid-size law firms
+5% to +10%
Management consulting firms
+10% to +20%
+5% to +10%
The overlap of professional liability and cyber continues to be a focus in the E&O marketplace.
As ransomware attacks have hit professional firms across all industries, insurers are increasingly concerned about silent cyber exposure.
Underwriters continue to place more emphasis on coordinating cyber and professional liability coverages.
Firms with poor loss experience, areas of risk management weakness or historically low rates will see higher rate increases, while firms that are paying closer to what insurers deem rate adequacy should see rate increase ease and level off.
While several excess insurers recently reduced their capacity from $10 million to $5 million, capacity is still widely available to meet the needs of large law firms.
Excess market carriers are being less aggressive on pricing partly due to increased competition from new entrants to the market.
Primary carriers continue to press for higher retentions.
Although insurers have been less inclined to offer policy wording enhancements, recent new market entrants and the increased competition they have brought, especially in excess layers, have helped buyers when negotiating coverages.
Professionals can expect questions on operations, financials, information security, client intake, engagement letters, staffing adequacy, lateral hires and SPACS, as well as on the degree of success in implementing return-to-work rules.
Rate increases vary firm to firm. Firms with poor loss experience, areas of risk management weakness or historically low rates will see higher rate increases. Better risks paying what insurers deem to be adequate rates will see lower rate increases. Increases may be in the 5% range for some firms.
Accounting firms are seeing premium increases in the 5% to 10% range. Underwriters are now rating on full revenue growth rather than 50% of revenue growth.
Underwriters are worried about the scope of services provided by consulting firms. There may be a pricing penalty for firms that offer a very broad scope of services or cross the line into an operational role with clients.
Premiums for management consultants are still being impacted by a very large claim payment made on behalf of a leading management consultant related to services provided to a pharmaceutical/opioid manufacturer.
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.
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).