Trimming Down the Cost of Professional Liability Insurance

Certainly most A/E & environmental consulting firms are carefully examining all their overhead items with an eye toward reducing costs. Professional Liability PL insurance premiums plus the variable costs associated with deductible obligations post loss are generally among the larger single line items after rent/payroll/health insurance.

To great extent the costs associated with your PL insurance are influenced by the manner which you present or portray yourself & your firm during the PL application process. I recognize that the 8-12 page annual application process is akin to
oot canal for most CFOs principals & office managers.

Its important to understand that this process is sort beauty pageant & small changes can have substantial influence on costs.

I have outlined few the ways that we help our clients to illustrate themselves to professional liability underwriters during the application process:

1. Clearly identify what you do with appropriate percentages. Seemingly simple but is important to be accurate:

Architect To you the architect may seem accurate to describe yourself as 100% architectural. But reality I can virtually guarantee that you provide specifications interior fixtures finishes or non-structural details. I would classify these services as Interior Design much-lower rated service type yielding much lower costs. Owners representatives client advocacy services public advocacy testimony & reports before zoning/planning boards are all services provided by an architect that themselves do not involve architectural design per se. There are too many other similar examples to list here.

Engineer Lets say that you are civil/structural engineer engaged bridge design/inspection. Bridge Design is viewed as high-rated service type in fact one the highest . Are you really doing ALL bridge design? Or are you engaged the design the approaches as well? Can some those services be described as highway design? What about inspections? Certainly those are considered
eports/opinions. highway design & reports/opinions receive much lower rate factor than does bridge design.

2. Clearly identifying your direct reimbursibles can also help trim costs down substantially. Travel & mileage costs per diem reproduction costs & more are classified as direct reimbursibles DRs . The industry standard for DRs is 3% to 6% but some engineers that are working with the Department Transportation can see their DRs higher than 10%. Showing these costs will course reduce your ratable base & your premiums by the same percentage. If you do not wish to track these costs to avoid making clients feel that they are being
ickel & dimed then you can still include est guess estimate what the direct reimbursibles will be as percentage your gross.

3. Identify any abandoned projects. There are plethora reasons for abandoned projects including loss developer funding changes plans sale the undeveloped property & bankruptcy among others. Beware carriers that require you to list abandoned projects & exclude coverage for related claims. Although unlikely is always possible to get sued even if the project never goes forward. Instead opt for an insurance carrier that allows for you to identify any associated revenue & remove from your
atable revenue to yield lower costs.

Timothy Esler CPCU is Principal with www.fenner-esler.com>Fenner & Esler Insurance Agency boutique insurance brokerage & risk management organization representing www.fenner-esler.com/AEPage.html>architects & engineers countrywide. Tims complete original articles are published www.thezweigletter.com>The Zweig Letter .