It is often frustrating when insurance premiums continually go up. However, since they are claims made policy forms, they are often very different than occurrence based policy forms. When your firm first opens its doors, the insurance carrier will assign a prior acts/retroactive date to your policy form. This means the carrier will provide coverage for covered errors that occur after this date. For each year your firm is open, the insurance company increases the coverage they provide to match the amount of years. After your one-year renewal, they are now covering your firm for the prior two years, so the premium will increase. This process is called step rating. Step rating is something that all professional liability carriers typically do for the first 5 to 10 years the firm has been in business. The step rating amount and length vary from carrier to carrier. However, the step rating also follows each lawyer, so if your firm hires a new lawyer, they will be going through step rating and you’ll most likely see an increase in premium for their portion of the premium for the next few years.

 

Once your firm has been insured for 5-10 years, you will have a ‘mature’ rating structure and the increases should level off (subject to change if area of practice changes, attorney changes, claims or rate increase from the carrier). It is important to have a knowledgeable broker like Burns Brokers who can help you understand why your premium is increasing. If it is due to an outside source, it might be time to switch to a different insurance carrier. We will help walk you through this process.