Survey: Insurance rates rising for architects, engineers

A survey by Ames and Gough revealed that 62% of architects and engineers had their insurance rates rise in 2012 with none dropping. Capacity for professional liability insurance, however, remains stable and is projected to remain so.


A survey by insurance broker Ames & Gough finds a majority of insurers expect to seek further increases this year even as their overall claim experience in this line remains flat. 

According to the Ames & Gough survey of 13 leading insurance companies (which, on a combined basis, represent more than 70% of the marketplace providing professional liability insurance to architects and engineers in the U.S.), 62% had rate increases last year and the remaining insurers had flat rates. None saw their premium rates drop. Half with the higher rates had average increases of 6% to 10% or more.  

For 2013, 69% of insurers are planning rate increases. The expectations as to the size of these increases range from the low single digits to 10% or more with the average expected increase in the 4% to 8% range. The survey traced the insurers’ drive for higher rates to a variety of factors. More than half (56%) of those planning increases indicated rates had been inadequate as a result of premium reductions over time. Historic claims experience (losses going back more than two years) was the second biggest factor, cited by 44% of those planning to raise rates. Rising reinsurance costs and recent claims experience each were cited by 11% of the insurers as factors driving up rates. 

Despite the rate increases, capacity for architects and engineers professional liability insurance remains stable. To help keep their costs under control some firms are looking at increasing the size of their policy deductibles and/or purchasing so-called “split limit” policies as a way to increase protection while holding down premium costs.  For instance, a split-limit policy might have a $2 million per claim limit and a $4 million aggregate limit. Others are relying on “single-project excess limits” to meet demands for more insurance. 

From the insurers’ perspective, rate changes for an individual account may be driven by a number of considerations. This year, type of projects was cited by 87% of survey participants as the biggest driver of rate changes. That was followed by loss experience within the past two years (70%) type of work or service (62%) and historic loss experience (more than two years), cited by 39%.

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