Short answer
If you are asking why your renewal went up, the cause is almost always one of three things: your revenue changed, your policy term changed or you moved to a different carrier. Revenue is the most common driver for design firms, since premium usually tracks fees. Compare renewal numbers on an annual basis before you decide anything, and note that pricing depends on your carrier and policy.
Why did my renewal go up?
One New Jersey firm asked us: “How much did renewal quote go up from last year? Looks like it went down? … is this for two years?” A few messages later the question changed to: “It went up by $7500?”
The firm’s revenue had grown 55%, and the old policy was a two-year term, so the two numbers weren’t comparable at a glance. Our answer was that it was a big jump because of the increase in revenues. Once the prior premium was broken out by year, it came to about $7,500 a year.
What drives professional liability premium for a design firm?
Carriers generally look at several factors together:
- Revenue: Fees are usually the starting point, and growth tends to raise premium.
- Disciplines: Different services carry different risk.
- Project types: Some project types draw more underwriting attention than others.
- Claims history: Past claims and circumstances can affect pricing.
- Limits and deductible: Higher limits generally cost more, and a higher deductible can lower the premium.
Each carrier weighs these differently, so two firms with similar profiles can see different prices. Our professional liability cost tool shows how we approach pricing. Our guide to how to read a proposal explains where to find these details in a quote.
How do you compare a renewal quote to last year’s premium?
Annualize both numbers before comparing them. A two-year premium needs to be divided by two, and installment payments need to be added up to a full-year figure. A quote that looks lower may be covering a different period.
Check the term, the payment schedule and any fees on both documents. Then compare the annual premium, the limits of liability and the deductible side by side.
What should you know about two-year policies?
A multi-year policy can have advantages, such as holding your rate for a longer period. It also comes with cancellation terms worth reading before you buy.
A firm on a two-year policy asked us what happens to the premium if the policy is cancelled before the end. In that policy, the premium was fully earned at inception for terms over 18 months, but a state notice in the same policy allowed a pro-rata refund less a fee. Those provisions can pull in different directions. Cancellation rules depend on the policy and any state notices, so read both and ask your broker how they apply to you.
Is a cheaper renewal quote from another carrier a better deal?
A Colorado and North Carolina architect asked us about a cheaper carrier: “I like the premium. What is the downside, if any?” That is the right question.
Compare the policy form and not just the price. Look at the definition of professional services, exclusions, the retroactive date, how defense costs work and which endorsements are included. A lower premium can reflect a narrower form, a higher deductible or different terms. It can also simply be a better fit for your firm, so look at the details before deciding either way.
Why does accurate revenue reporting matter?
Premium usually starts with the revenue you report, so accuracy matters. Some policies are subject to audit, and a mismatch between reported and actual revenue can lead to an adjustment. Report your numbers carefully on the application, and tell your broker when revenue changes during the year.
Example: a renewal that looks higher than expected
Consider a hypothetical firm whose revenue grew sharply during the year. Its prior policy ran two years, and the renewal is a one-year policy at a higher number.
The firm divides the old premium by two and compares it with the new annual premium. The increase now reflects the revenue growth and not a surprise. The firm then checks the limits and deductible on both documents and asks its broker what else changed.
What to check when you open your renewal quote
- The policy term, and whether last year’s premium covered more than one year
- The annualized premium on both policies
- Your reported revenue and whether it matches reality
- The limits and deductible on each policy
- Cancellation and refund terms, especially on multi-year policies
- The policy form, if you are comparing a different carrier
Request a policy review if you’d like help lining the numbers up.
Related questions
Why did my professional liability renewal go up?
The usual reasons are revenue growth, a change in policy term or a change in carrier. Compare annualized premiums first.
Does revenue growth raise my premium?
Often yes, since premium usually tracks fees. The size of the change depends on the carrier and your firm.
Is a two-year professional liability policy a good idea?
It can hold your rate longer, though cancellation terms matter. Read how the policy handles refunds before you buy.
Is the cheapest professional liability quote the best one?
Not necessarily. Compare the policy form, limits and deductible as well as the premium.
Can my reported revenue be audited?
On some policies, yes. Report revenue accurately and tell your broker if it changes.