PLI stands for professional liability insurance. Professional liability insurance for engineers, architects and surveyors is often referred to as PLI for designers. PLI premiums are determined through a process involving the assessment of several factors over which designers (professional service type businesses) have some control. For example, design professionals can improve premiums by exploring the factors insurance carriers use in their quotation creation process for professional liability clients. Consequently the application process should be optimized for achieving the best possible outcome for the design firm or independent professional.
Design companies must make their business attractive to insurance carriers to obtain the best possible terms and pricing. The first step in this strategy is to identify the different risk factors and then present your design firm in the most positive way. While numerous factors determine the risk that a design firm poses to an insurance company, for the purpose of this discussion we will focus on the most critical areas. They include:
1. The location of the firm
2. The locations of design firm projects
3. Project types (traditional commercial projects such as offices, warehouse and retail are often more attractive to carriers than swimming pools and amusement parks).
4. Loss History
Project with high perceived risks are much less attractive to insurance carriers than projects with a nominal risk profile. Projects with emotional attachments or those which have a high loss exposure can be detrimental to design firm PLI. Though working within the genres is necessary, it is prudent to understand the exposures and manage the risk as much as possible.
Loss history is reviewed closely by insurance carriers. Design projects can results in significant claims. There also is the perception and statistical likelihood that past claims are a fair indicator of potential future claims activity. As a result, a design firm with some significant claims in their past generally pays a much higher rate than a similar firm with nominal past claims. Carriers can look as far back as ten years back when evaluating a larger firm's loss history.
If a firm has a history of claims it still possible to cast the exposure in a more positive light utilizing the appropriate approach and documentation. When carriers review the loss history of a design firm, the approach and documentation that the design firm utilizes will prove critical in the resulting PLI premiums. Ultimately, design firms along with their PLI broker must negotiate with insurance carriers to favorably characterize their firm and provide the mitigating information necessary to encourage the most competitive premium quotes.
