How will E&O Insurance Change in the Near Future?
The errors and omission insurance market has come under increasing pressure from the rising social inflation and “nuclear verdicts” awarded by courts. Fueling this is a growth in claims filed by aggressive plaintiffs not to mention tremendous changes brought about by the COVID-19 pandemic.
For lawyers, title agents, and other professionals, there are many unsettling questions as to what awaits in the future. While we can’t provide an actual prediction of the future, attorneys and title agents will find a new and evolving landscape when they search for E&O insurance now and beyond.
Here are some potential changes to expect.
E&O Rates Will Continue to Surge Upward
After a decade of mostly steady rates, premiums for new errors and omissions insurance policies and renewals will continue to increase. In 2020, more than 30% of professional liability insurance premiums increased from 2019, the highest percentage since 2005.
Between 2010 and 2018, E&O premiums increased from 12% to 17%. That rate went up to 26.5% in 2019 – double the share of premiums in 2018. In 2020, premiums rates rose to 31.1%. Unfortunately, premium rates will only increase over the next two years.
The increase in E&O insurance rates is largely due to the rising costs of legal defense and payouts for claims increasing across the board.
Unfortunately, even companies that haven’t had claims in the last five years have been affected by these increases. Smaller businesses may be wondering why they haven’t had rate reductions even with lower revenues brought about by the pandemic. Insurance agencies seem to have priced this and are expecting the businesses to have more revenue in the coming years.
Also, keeping errors and omissions insurance premiums growth in check is important to ensure the survival of businesses is not jeopardized by unaffordable insurance costs. This issue is particularly pressing given how the COVID-19 pandemic negatively impacted businesses. Title agencies and law firms looking to lower their premiums should check with their insurance providers to see if they offer rebates, discounts, or special dividends.
Innovative Offerings Will Become Mainstream
A handful or technological advancements are poised to transform the very nature of professional liability insurance. The use of technology in this industry has seen exponential growth in the last few years, with business models, processes, and services rapidly evolving. Incorporating the latest technological innovations will allow insurance carriers to cover new and existing risks, enhance their efficiencies, gain an edge over the competition, and improve customer experience.
Technological trends shaping the future of E&O insurance include:
- Blockchain: While cryptocurrency is not widely accepted as a mainstream currency, its technology, blockchain or distributed ledger technology, is being adopted by insurance companies. This technology allows companies to decentralize processes and protect personal user data from cyberattacks.
- Big data and predictive analytics: With so many pools of data available, insurance carriers can use big data and machine learning technology to identify their customers’ needs, understand their behavior, and gain access to profitable trends and patterns. This allows them to perform complex risk assessments and adapt their policies based on consumers’ behavior.
- Artificial Intelligence (AI): At the present, very few errors and omissions insurance carriers are harnessing AI to its full potential. But as technology matures, more companies will implement AI to make insurance more predictive and intuitive. AI gives insurance carriers the opportunity to provide more personalized services or predict the risk of an event.
- Process automation and virtualization: Machine language-driven assistants can integrate seamlessly with legacy systems to streamline business processes. E&O insurance carriers can simplify the processes of creating insurance policies, execute changes in minimal time, and enable predictive pricing.
- Future of connectivity: The future of E&O insurance points toward greater connectivity that goes beyond smartphones. Insurance carriers have begun using telematics to harness first-hand data, gain a holistic understanding of the insureds, and provide real-time services to clients.
We can expect the continued upswing of technology in the errors and omissions insurance industry, influencing core functions, products, and services.
Cyber Liability Policies will De-Bundle from E&O Insurance
Businesses are often perceived as soft targets by cyber attackers. These individuals or organizations can steal data, disable computers, or use a breached computer as a central point for other attacks.
Some businesses have poor data protection measures in place and many rely on minimal data breach coverage in their errors and omissions insurance policy. With the COVID-19 pandemic, telecommuting became the new norm without much aforethought. As a result, business and client data was exposed to cybersecurity risks.
While cyber coverage is included in E&O insurance policies up to a certain limit, purchasing a standalone cyber policy with more robust coverage and higher limits should be considered.
Exposure for attorneys and title agents includes liability for the loss of personally identifiable information and business interruption. Coverage for these contingencies may not be enough on an errors and omissions insurance policy. In a world of expanding cyber threats agents are going to review their policies and consider additional coverage.
Competitive E&O Insurance for Lawyers and Title Agents
The errors and omission insurance industry has experienced many challenges, but it’s important to keep looking forward. At Attorneys First Insurance, we are here to help our current and potential clients prepare for, respond to, and adapt to the changes.
We know the risks attorneys and title agents face and strive to make sure they have adequate E&O protection. We customize coverage to meet your exact needs and offer lower rates and better terms than other providers. If you have questions about errors and omissions insurance or you’d like to get a quick, straightforward quote, feel free to reach out to us today.