Higher-risk projects, inflation pushing up rates for architects and engineers
More than 90% of surveyed professional liability carriers intend to raise rates for architects and engineers, Ames & Gough reports.
Professional liability insurance rates for architects and engineers are going to see a third-consecutive year of increases as carriers voice concern regarding economic and social inflation, high-risk projects and professional fields and the growing prominence of alternative project delivery methods, such as design and build, according to Ames & Gough.
The specialty insurance broker and risk consulting firm surveyed 17 of the leading insurance carriers, which write a large percentage of the U.S. professional liability for architects and engineers, and found that only one is not planning to raise rates this year. The outlier intends to keep rates flat.
Among carriers planning to raise rates, 75% are planning increases up to 5% and the remaining carriers intend to increase rates by 6% or more.
Ames and Gough reported that concerns over rate adequacy and larger claims are driving 25% of survey respondents to increase rates across their entire book of business. More than half said they planned to target clients in high-risk disciplines, such as structural engineering, for increases. An additional 56% said they would look to raise rates for higher-risk projects, such as multifamily dwellings.
“Even as insurers providing professional liability coverage continue competing for A/E business, many are focusing on the most desirable risk segments while being relentless in applying sound underwriting discipline across their entire portfolio,” Cady Sinks, assistant vice president and partner, Ames & Gough, said in a release.
He explained design firms need heightened diligence and a holistic approach to risk management, ensuring to take into account all aspects of the business.
During 2023, only 18% of carriers surveyed saw year-on-year claims severity worsen. Ames & Gough found that the claims severity situation improved for 41% of carriers, while an additional 41% said the situation stayed the same.
Although claims severity stabilized, many survey respondents continued voicing concern about the impact of inflation, both economic and social, on claims.
Further, most carriers surveyed have had to pay multimillion-dollar claims in recent years, with 23% paying a claim of $5 million or more and 12% paying a claim of $10 million or more.
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