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Legal malpractice insurance carriers are not created equal, and as a result, prospective policyholders should step up their game and learn some insurance carrier selection basics—specifically, how to assess which insurance carrier is a “best fit” for their needs.
Financial Security: Too many legal professionals purchase their insurance policies on the basis of premium dollars and not on the financial integrity of the insurance carrier.
Where can a busy professional go for help to assess the financial strength of a carrier? You can choose from many reputable rating agencies. One is A.M. Best, which provides an insurance company rating service called Best’s Financial Strength Rating, providing information on an insurer’s financial strength and ability to meet its ongoing insurance policy and contract obligations. While accessing the results through Best’s Insurance Reports and its website requires a subscription, the ratings can also be found, free of charge, on an insurer’s website. Those working with an insurance broker can also ask for the rating of individual carriers. A guide and key to Best’s rating table can be found here.
Policy Premiums: Pricing is always a factor when choosing coverage, as it should be. However, trying to compare quotes from various carriers can be like comparing apples and oranges. An experienced insurance broker can, and should be able to help you choose.
Numerous factors go into the insurance underwriting process, and while policies may be similar, coverage differences also may impact pricing. Factors influencing pricing can include (but not be limited to) policy limits, retentions/deductibles, claims history, geographic location, and other factors a carrier may view as either elevating or lowering your risk to them as an insured.
Carrier Licensing: With a few exceptions, for an insurance carrier to write business in a state, it is necessary for the carrier to be licensed in that state. They are then considered an “admitted” carrier and are regulated by the state.
To ensure an insurance carrier courting you, or you them, is licensed in a state where you do business, access licensing information on the National Association of Insurance Commissioners’ website through the Consumer Information Source page. A state-by-state report by insurer can be found by selecting an insurer in the search box, and then selecting the licensing option.
Customer Service: You can and should expect excellent customer service when shopping for an insurance policy and when dealing with your carrier thereafter. It pays to do some research on a carrier’s reputation before signing on the dotted line. While this research process can be rather subjective and time-consuming, resources are available to help you get the answers you need.
Industry Associations: Checking association resources within the legal profession can prove helpful. Many association websites contain information about insurance carriers, with in-depth carrier reviews and links to other resources.
Insurance Periodicals: Industry-related periodicals for the insurance buyer can provide helpful information. One is Business Insurance magazine’s website which contains a wealth of information such as news articles, blogs, and helpful links.
Insurance Commissioners’ Websites: Each state has its own insurance commissioner website. However, locating the page for each state can be cumbersome. Thankfully, the National Association of Insurance Commissioners has compiled a one-stop shopping option, with a dedicated page containing links to all state sites.
Claims-Handling Practices: Everyone purchases legal malpractice insurance for the same reason—protection in the event of a claim. Hopefully, the coverage purchased will never be needed, but in the event it is, it is helpful to have knowledge up front about a carrier’s claims-handling practices.
When selecting a carrier, a prospective insured should ask about the claims-handling process for each carrier. Specifically, will they be working with one claims adjuster or with a call center during the claims process? If working with a claims adjuster on a one-on-one basis, is that adjuster local and, if so, will the insured be meeting with the adjuster personally or only by way of telephone conference?
Navigating the claims process can be time consuming and stressful. Having the personalized, local support of an experienced claims adjuster can be extremely helpful to a lawyer defendant.
Some carriers try cases more frequently than others, taking a tough defense stance. Others may settle for nuisance value if provided the opportunity. It is well worth an insured’s time when choosing an insurance carrier to inquire about claims-handling processes and a carrier’s history. Do the homework—it will be worth it.
Peer Networking: Last, but not least, talk to your peers. Who are they insured with and what experiences have they had with their carrier(s)? Don’t limit your conversation to just one source. Also, realize that others may feel uncomfortable sharing their claims history with you, thus why it’s wise to talk to as many people as possible.
Choosing insurance coverage shouldn’t be an enigma. Engaging in a little ground work can help you rest assured you made an informed and knowledgeable decision when choosing your insurance carrier.
About the Author
JoAnn L. Hathaway is a practice management advisor with the State Bar of Michigan, and is the author of Legal Malpractice Insurance for Lawyers in One Hour. She is a member of the Law Practice Today Editorial Board.