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Survey Report

Insurance Marketplace Realities 2022 – Errors and omissions

Financial, Executive and Professional Risks (FINEX)
N/A

November 15, 2021

Underwriters are putting significantly more weight on cyber exposure, fueling increased premiums on the entire E&O-related package.

Rate predictions

Rate predictions: Errors and omissions
  Trend Range
Large law firms Increase (Purple triangle pointing up) +5% to +10%
Mid-size law firms Increase (Purple triangle pointing up) +5% to +10%
Management consulting firms Increase (Purple triangle pointing up) +15% to +20%
Accountants Increase (Purple triangle pointing up) +10% to +25%

Key takeaway

Because consulting firms, accounting firms and smaller law firms can often buy combined professional liability and cyber policies, underwriters are putting significantly more weight on cyber exposure, particularly with regard to the risk of breach of confidential client information. This has led to increased premiums on the entire E&O-related package. 

Errors and omissions (E&O), or professional liability, is arguably the most complex area of specialized insurance, with several distinct marketplaces:

  • Stand-alone E&O for certain professions (lawyers, consultants, accountants)
  • Technology E&O, sometimes stand-alone, but often coupled with cyber insurance
  • Miscellaneous professional liability (MPL), including those industries without a specific, dedicated policy form

The overlap of professional liability and cyber continues to be a focus in the E&O marketplace.

  • As ransomware attacks have hit professional firms across all industries, insurers are increasingly concerned about silent cyber exposure.
  • There is an increased emphasis by underwriters on coordinating cyber and professional liability coverages.
  • London markets now require silent cyber exclusions. While this adjustment has not yet been widely seen in the U.S. and Bermuda, given the fact that Lloyd's participates on most large law firm programs, we believe it is only a matter of time.

Lawyers

  • Capacity is being carefully managed, especially on primary layers where insurers continue to prefer smaller deals. More ventilation is being sought between layers for multilayer participation, with most insurers demanding higher increased limit factors (ILFs) to provide capacity, especially on first and second excess layers.
  • Although insurers have become less inclined to make policy wording enhancements, recent new market entrants could create increased competition, especially in excess layers, giving buyers more leverage when negotiating coverages.
  • COVID-19 continues to impact insurance renewals, with carriers often requesting completion of COVID-19 questionnaires for existing policyholders and for new business. Professionals can expect questions on the ongoing impact on operations, financials, information security and even legal advice and contract provisions in the work-from-home era — which may outlast the pandemic.
  • Rate increases increasingly vary firm to firm. Firms with poor loss experience, areas of risk management weakness or historically low rates will see higher rate increases. Better risks paying what insurers deem to be adequate rates will see lower rate increases. Increases may be in the 5% range for some firms.

Accountants

  • Accounting firms are continuing to see increased rate pressure, and firms with losses are seeing premium increases in the 15% to 20% range. London markets are seeking higher premiums than domestics.

Consulting Firms

  • Underwriters are worried about the scope of services provided by consulting firms. There may be a pricing penalty for firms that offer a very broad scope of services.

Technology

  • Evolving product and service delivery technologies are pushing the edges of technology E&O into other coverages, including general liability, cyber and other types of professional liability.
  • Internet of Things (IoT) devices, in particular, are interacting with people, property and equipment in ways that can create new exposures.
  • New property damage and bodily injury liabilities have arisen from the use of monitoring services that run on IoT technology and connected networks. These new liabilities have led to further focus on contract requirements and interactions between insurance policies.
  • Carriers continue to be more reluctant to offer excess technology coverage on blended technology-cyber programs.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.

Contacts

Joe DePaul
National Cyber/E&O Practice Leader, North America

FINEX Cyber/E&O Thought and Product Coverage Leader, North America

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