Insurance Marketplace Realities 2026 Spring Update – Professional Services

Key takeaway

We have entered a steady phase in the primary layer market. Rate action taken during the hard market cycle has resulted in general rate adequacy at the primary layer level. Insurers are seeking to maintain this position by adjusting rates up 1% to 3% for inflation. Excess layer insurers are still working to correct inadequate pricing with significant price increases in the 5% to 10% range as claim severity continues to impact layers above the primary.

Lawyers

• Claim severity continues: The severity of LPL claims has not abated. More claims are exceeding the primary layer. Claims of $100 million or more continue to impact the market.
• Inflation impacting rates: Primary underwriters have been successful in correcting pricing to reflect severity and are now looking to hold the line with inflation increases. Excess insurers have less flexibility to correct rates and are continuing to correct rates upwards. 
• Modest primary competition: Primary layers have benefited from some competition as insurers push to move down to the primary from excess positions to gain better price to exposure ratios. 
• Change in rating base: Some underwriters are considering a change in the rating base from lawyers to revenue. Rate to revenue is not keeping up with firm revenue growth. Growing use of AI is expected to reduce the number of attorneys or at least slow attorney growth while increasing revenue, therefore distorting the attorney rating base.
• Underwriting focus: Increasing use of AI by lawyers continues to be an underwriter focus. Underwriters are concerned with senior attorney oversight and compliance with professional ethical standards and making sure there are tight controls over AI selection and use to ensure accuracy. Underwriters are also focused on the following:
  • Training/supervision
  • Significant lateral movement with respect to lateral selection, integration and cultural dilution
  • The financial stability of law firms
  • Law firms working with entities in sanctioned countries
  • Ensuring that there are redundancies in place if law firms are faced with a cybersecurity incident
  • Making sure there are tight controls over AI to ensure accuracy

Management consultants

• Procurement and FCA scrutiny are increasing: Consultants are more frequently engaged by government entities to improve efficiency and reduce costs, while regulators and insurers are closely monitoring billing transparency, administrative processes and payment methodologies — highlighted by major settlements
• Conflicts of interest are an enforcement priority: The DOJ is increasingly targeting consultants for failing to disclose conflicts when bidding for work, with high‑profile cases.
• Breach‑of‑contract claims pose outsized exposure: These claims typically require a lower burden of proof than negligence, allow damages tied directly to contract terms and are often excluded from corporate indemnity obligations.
• Artificial intelligence is expanding risk faster than coverage clarity: AI consulting is driving revenue growth as organizations invest heavily in deployment and integration, while insurers are still adapting underwriting approaches; AI‑specific exclusions remain limited, creating uncertainty around future claims and coverage interpretation.
• Underwriters continue to focus on:
• Cyber controls
• Practice areas: Turnaround management, cryptocurrency, tobacco and pharmaceuticals (especially opioid) continue to be considered high hazard.
• Financials: Clients have become more demanding and are pushing back against concepts like billable hours and seeking cost transparency
• Appropriate licenses being in place when insureds work with sanctioned governments
• Controls over the use of artificial intelligence
• Global professional service safeguards to ensure engagements with foreign entities don't violate FCPA statute