Welcome to Groveview Insurance Services

October 29, 2002

The current condition of Attorneys E&O insurance is characterized by less choice and higher premiums. Many insurance companies have stopped writing the line all together while others have added practice area and geographical restrictions to law firms they are willing to entertain for coverage. To make matters worse the carriers that remain in the market place are being deluged by new applicants who have been non-renewed by carriers who have left the market. This has led to a capacity problem as insurance carriers must maintain sufficient capital to cover anticipated losses and expenses and can only take on so much new business before the are forced to stop writing additional accounts or obtain more capital.

To understand the cause of the current hard market one needs to understand that insurance companies derive their financial gain from investment income and underwriting profit. When the stock market was soaring companies competed for available premium dollars which kept the cost of insurance to law firms low as the insurance companies investment opportunities more than made up for any short fall in premiums. With the decline in investment income underwriting income assumes greater importance and must provide a larger share of the companies income.

How long the current situation will persist is uncertain. However it is our opinion that the premiums now being charged are more than adequate and should cause other companies to enter the E&O field and the increase in competition should at least temper any future premium increases. But a return to soft market conditions (low premiums) enjoyed over the last several years depends on an improvement in investment opportunities for the insurance industry as a whole.

It is now more important than ever that your insurance broker provide you with coverage options where opportunities still exist for affordable protection.