Waiting till the last minute to buy your Christmas gifts might save you money. But waiting till the last minute to renew your attorney malpractice insurance likely will cost you money. Unlike many other types of insurance, malpractice Insurance cannot be bound without the malpractice insurer’s specific application. Some malpractice insures will use a competing insurer’s new business application, but this is the exception rather than the rule.
As an independent malpractice insurance agency, we work with my different malpractice insurers and can use our one page ‘indication’ form to provide what is called a ‘premium indication’. The ‘premium indication’ is subject to a full insurer application along with supplements. The malpractice insurer must approve the application. Once the application is approved, we are allowed to provide ‘binding terms’ that may or may not be subject to additional conditions. Some malpractice applications are not approved on the first go. Underwriters may ask for more information depending on application answers. This makes for back and forth questions and answers. And depending on the answers; premiums do change or the offer to provide coverage is withdrawn.
It is at this point upon acceptance of the terms and fulfilling the conditions that coverage can be bound. Or the search for coverage may start all over again with no time left.
In addition to the logistics, many malpractice insurance underwriters close early for end of the year and/or are fully scheduled with a backlog of work they already need done before they can leave. Discretionary credits can disappear as the underwriter’s temperament changes with time growing short. Many insurers will actually refuse to work on any new business as year-end gets closer.
With fewer options prices start to go up and terms are less generous. Law firms that wait until the last minute to obtain coverage may get coverage at a much higher price or may not get it at all as January 1 approaches.
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Lee Norcross, MBA, CPCU Managing Director, CEO (616) 940-1101 Ext. 7080 |
