Engineering Inc - July/August 2017 - 32

PREMIUM TIPS

When it comes to premiums, Al Rabasca, director of industry
relations at XL Catlin, says that as a percentage of revenue they
remain historically low, and rates remain affordable for the vast
majority of firms. On average, premiums are down 7 percent
from fiscal year 2015. Mary Lodwick, president of Phoenixbased Stuckey Insurance and the current president of the Professional Liability Agents Network (PLAN), says it's a "buyer's
market, with tons of carriers and rates going down."
Even with so much good news, 12 percent of firms changed
carriers, and of those, 72 percent cited lower premiums. A
majority of firms (64 percent) asked their brokers for multiple PLI quotes at a time when most are growing, notes Matt
Richards, vice president of Strand Associates and co-vice chair
of the ACEC Risk Management Committee. Richards wonders
whether growing firms will continue to focus on PLI cost or
look more at factors such as pre-claims assistance, risk management programs and claims handling.
"Maybe the firms that changed carriers saw rate increases at
renewal, or perhaps they were shopping rates and not shopping
experience," says Dennis Stryker, general counsel for Rick Engineering Co. He advises against that mindset with premiums so
low-a median of 1 percent of revenue or less for firms grossing
$2.5 million or more each year.
"There used to be a greater distinction on policy forms," says
Michael Welbel, vice president of Risk Strategies Co. and president of a/e ProNet.
Now the top tier of insurers has become homogenous in terms
of key features, Welbel says. While some carriers may offer much
lower rates, they might be lacking in key aspects, resulting in
problematic exclusions, lack of risk management support, or
no dedicated claims team, he says. For example, when a carrier
comes in far below its competitors, Lodwick says, that can be a
red flag. "There's a reason everyone else is where they are. This
new guy hasn't figured out the secret of PLI," she says. With
claims not following rates lower, at some point these low rates
will become unsustainable, she says.
When choosing a carrier, firms should look not just at the
premium but also at the value that a carrier can add to their
business. Rabasca says when
designers buy insurance,
it's not just a policy. "It's a
program that includes risk
management and education.
XL's insureds that go through
those programs become better
insureds but also become better businesspeople," he says.

Member Firm
revenue is up
an average of 4
percent for the
first quarter of
2017, compared
with the same
period last year

ENGINEERING INC.

JULY / AUGUST 2017

MANAGING RISK

Although 66 percent of firms
have no outstanding claims,
the survey found that only the
largest firms (over $20 million in revenue) have in-house
counsel or full-time risk managers. This leaves the principal

"Good project
management
practices are
a great way to
mitigate risk-
having really
experienced
people, trying
to manage
projects very
tightly."
JEFF ASHER | KPFF

or a chief executive in smaller
firms with the responsibility of
bringing in business and managing risk.
"It's important to be smart
about project and client selection, and finding good people
to do the work," says Jeff Asher,
principal and chairman of KPFF.
KPFF rarely turns down work,
unless a project isn't a good
match. That may mean a schedule is not realistic, not enough
capital has been allocated, or
there may not be the right technical capabilities to get a project
done. "Good project management practices are a great way to
mitigate risk-having really experienced people, trying to manage
projects very tightly," Asher says.
"If none of those things work,
or it's just unmanageable, sometimes we'll walk away."
Rick Engineering might turn
away work when the risk outweighs the fee-or the contract

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