INSURANCE (GENERAL); MALPRACTICE; OCCUPATIONS (GENERAL);

INSURANCE - MALPRACTICE;

You asked for a discussion of recent trends in malpractice insurance premiums for professions other than medicine.

SUMMARY

We were able to obtain anecdotal information regarding trends in Connecticut for accountants, architects, attorneys, and engineers and national survey information about engineers. For all of these professions, premiums have been increasing in the last few years, in some cases at rates of 40% or more in the past year. For all of the professions, individual premiums depend on the coverage limit, claims experience, the professional’s specific type of practice, and other factors. In several fields, major insurers have left or are leaving the market, leading to concerns about availability and cost of coverage.

We have also enclosed an article by the firm A. M Best, which notes that malpractice insurance premiums for corporate officers and directors increased by 29% in 2001 and 2002, following an increase of 11% in 2000.

ACCOUNTANTS

In the past year, premiums have increased by 5% to 10% for small and medium firms, but as much as 35% to 50% for larger firms, according to Ken Gross of Pace Professional Services, which provides insurance for members of the Connecticut Society of Certified Public Accountants. Increases have been particularly large for firms that do public audits. There were smaller increases in the previous few years, following declines in the late 1990s. According to Gross, some insurers base their premiums on an accounting firm’s billings, others on the number of accountants who work for the firm, and others use a combination of methods. He estimates that a sole practitioner would have a premium of about $ 500 to $ 2,000 per year. There are about five major insurers currently in the market; a similar number have left the market in recent years. Although coverage is still generally available, policies with high coverage limits are becoming harder to find.

ARCHITECTS

According to Diana Harp-Jones, executive director of the Connecticut chapter of the American Institute of Architects, malpractice insurance premiums in the state have increased dramatically in the past several years after increasing slowly in the late 1990s. In 2002, premiums increased by about 40% on average. According to Robert Camilleri of Camilleri & Clarke, a major broker of insurance for architects and engineers, premiums for design professionals increased significantly in the wake of the September 11, 2001 attacks, reflecting increased concern about potential liability. In 2001, premiums increased by 20% to 30%. Three or four firms account for the bulk of the market after Kemper’s recent departure. One of the remaining firms (DIPC) is being sold, raising concerns about the future availability and cost of coverage. The cost of a premium is based on a firm’s revenue, and usually amounts to 1% to 2% of revenues according to Camileri.

ATTORNEYS

According to John Kronholm of the Connecticut Bar Association, malpractice insurance rates have increased by 15% to 40% over the last year after smaller increases in the last few years. However, during the late 1990s, rates had fallen dramatically, and current rates are only now returning to where they were in the mid 1990s. According to Kronholm, the premium for a sole practitioner with $ 1 million in coverage is currently between $ 2,500 and $ 4,000. The premium for a larger firm is proportional to this rate for small and mid-sized firms (up to perhaps 30 attorneys). Larger firms have lower per-attorney premiums, but generally carry higher levels of coverage. There are about 15 firms writing policies, of which five have the bulk of the market. According to Kronholm, there has been some tightening of availability of coverage in the past few years, but attorneys still have a choice of carrier and there is not a crisis in the field.

ENGINEERS

According to Paul Brady of the Connecticut Council of Engineering Companies (CCEC), the malpractice insurance market varies by subfield. For civil engineering firms (the largest subfield), premiums went up by about 25% in 2002, after smaller increases in the last few years. Premiums are based on a firm’s revenues to a larger degree than its number of employees. The availability of coverage has not been an issue until this year, but sale of DPIC has raised concerns.

The national body of engineering companies surveys member firms annually on malpractice insurance. According to the 2002 survey, premiums increased about 14% on average, with larger firms seeing somewhat larger increases than smaller ones. On the other hand, the average premium decreases somewhat with firm size. For firms with up to 25 employees, the average premium was more than 1. 6% of gross revenues; for with more than 50 employees the average was less than 0. 7% of gross revenues. Nationally, there about a dozen insurers in the market but two of them (DPIC and CNA) account for more than 60% of the market. The survey also includes data on the impact of potential liability litigation on the firms’ practices. It is available on-line at http: //www. acec. org/advocacy/pl_survey_2002. pdf.

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