Engineering Inc. - July/August 2007 - (Page 23)

PROFessiOnaL LiabiLiTy insURanCe ith the soft insurance market firmly established, fiscal 2006 was another good year for design professionals to purchase professional liability insurance (PLI), according to ACEC’s annual member survey. The results from 726 member firms show there is plenty of capacity, rates have flattened and premiums are relatively stable. The question now is: How long will the soft market last? Chuck Kopplin, who led the ACEC survey and is a principal at Milwaukee-based Graef, Anhalt, Schloemer & Associates Inc., calls the results “good news” and essentially “a repeat of last year,” when steady rates industrywide buoyed insurers with the confidence to underwrite new projects. Though the trend has continued through the first half of this year, some industry-watchers say it’s unclear how long the honeymoon will last. Even quality accounts with sizable billings and a good loss-ratio history might see future premiums increase, says Wyatt Sanders, president of the Professional Liability Agents Network. As a growing number of insurers flood the market, Sanders says, new competition likely will lead to short-term decreases in insurance premiums, which typically are attractive to new customers. He cautioned, however, that larger-thandeserved premium decreases brought on as a result of competition typically result in rate hikes down the road. With architectural and engineering (A/E) revenues on the rise, Sanders says, firms should choose their insurance carriers wisely because a discounted rate should not be the only consideration. Al Rabasca, director of industry relations for XL Insurance of Monterey, Calif., says some newer insurance carriers are “pricing irresponsibly” at levels they “are not going to be able to sustain over the long haul.” Such price-cutting hastens the hard market, he says, because it’s only a matter of time before insurance carriers pull out, reducing capacity and stifling competition. Rabasca urges designers to apply the principle of Qualifications-Based Selection (QBS) rather than choosing carriers based on price and premiums alone. Survey results show that more A/E firms saw premiums decrease than increase in F.Y. 2006. Despite the news, Jerry Sullivan, global product leader for Beazley Group, a London-based insurer, notes that premiums have not softened for engineering firms as much as for other industry sectors. For example, insurance carriers continue to expect designers to shoulder higher deductibles, usually a percentage of gross 2007 By Maureen Conley W Premiums Continue Level Trend While Uncertainty Clouds Future Rate Outlook Survey billings. The survey indicates 14 percent of firms reported increased deductibles for F.Y. 2006. About one-third of firms have experienced increased deductibles in the past two years (see Figure 1). The survey shows 82 percent of respondents reported the same deductible as last year. Results show that project policies remain hard to come by, with only about 17 percent of the firms surveyed having project-specific PLI. Lorna Parsons, managing director of the Construction Industry Group at CNA/ Victor O. Schinnerer, says that although her firm has the ability to write project policies, current pricing makes doing so unattractive. he survey results are ”good news” and essentially “a repeat of last year.” ChuCk kopplin graef, anhalt, schloemer & associates inc. t July / August 2007 ENgINEERINg INC. 23

Table of Contents for the Digital Edition of Engineering Inc. - July/August 2007

Call for Entries
Contents
From ACEC to You
News & Notes
Market Watch
Legislative Action
The Big Dig
Risky Engineering
2007 Professional Liability Survey
Institute For Business Management Fall 2007 Course Catalog
Roadside Technology
2007 Convention Wrap-Up
2007-2008 Excom
2007 Fall Conference Primer
Business Insights
Technology
Members in the News
One on One

Engineering Inc. - July/August 2007