Peter W. Wilson (at left) is president and CEO of CNA Pro.
The professional liability market has grown like Topsy. A dozen years ago, it was a relatively small market with few competitors, most of them in the surplus lines arena. A fledgling Professional Liability Underwriting Society was holding its first meeting in Chicago and attracting fewer than 100 people. Today, the market is sought after by more and more companies and the PLUS meeting attracts thousands.
However, it is not just the written premiums that have grown. The liabilities facing companies in the professional liability field are significant. The exposures have grown exponentially. For example, a record number of class action suits were filed in federal court last year. The settlement value of the just over 600 cases pending is in excess of $4 billion. Five years ago, the settlement value of pending cases was less than $1 billion.
Insurance companies with a long line of experience in this market are few and far between. Some companies, enticed by the large average premium, jumped into the market and have already left, having found, to their chagrin, that it is not a market to be entered lightly.
CNA Pro is unusual in that it has been in this market for more than 40 years and intends to stay there.
CNA Pro is the leading writer of professional liability coverage for accountants, realtors and architects & engineers.
"We have a fairly substantial market share position in most of the larger segments of professional liability," says Peter W. Wilson, president of CNA Pro, New York City. "We have a lot of history and underwriting expertise. The new guys on the block can experience adverse selection.
"We also have substantial relationships in the D&O area with the Fortune 500 industrial firms," Wilson continues, noting that CNA Pro writes approximately 30% of the D&O coverage for these firms. "We do see some opportunities there. The embedded relationships offer us an opportunity to provide additional coverages in the fidelity and professional liability areas."
Wilson says that the real growth "lies in the traditional professional liability lines, especially in the small corporation D&O and professional liability. We're seeing very strong growth in this area coming from our HPAs (high performance agencies)."
CNA Pro also writes a "fair amount of EPLI for the classes that we handle," Wilson continues. "We expect increasing emphasis on service and mitigation in the employment practices area. We have a number of employment lawyers on staff and have relationships with other firms. We have a consulting relationship with our clients to help them through employment practices problems. We're really engineering that risk." He adds that this includes nonprofit and small corporate risks as well as the large firms.
John S. Lopes, executive vice president, heads up the financial institutions sector at CNA Pro.
John Lopes, executive vice president at CNA Pro, discusses some of "the consistent themes that we've seen over the last two or three years. There is an increasing movement toward blending of D&O and E&O coverages. There can be a significant savings cost, and it also stops the finger pointing among carriers if all the coverages are with the same company."
Lopes, who is in charge of the financial institutions sector at CNA Pro, says that "banks were really the first to embrace the concept." He goes on to point out that "we were the first company to really come out with a fully integrated policy--Select Solutions--in 1998. It is an innovative approach that reflects how the market is buying insurance."
Select Solutions includes the "guts of a blended policy with general terms and conditions" and then offers various coverage options for D&O, EPLI, entity coverage, professional liability, fiduciary liability, bond, and so on. "It's a menu approach," Lopes says, "that includes the option of selecting as many or as few coverages as needed." The coverages can be incorporated under one limit or limits can be broken out.
For example, Lopes notes, "Companies have built two towers of coverage limits, with corporate exposures under one side and individual coverages on the other. You can do that within the same menu. It's very flexible. You can purchase the basic coverage and attach anything almost as a rider. One of the coverage options is just called 'other,' allowing for the handling of any unique exposures. We've found that customers really have warmed up to this approach. It removes a lot of inconsistencies. It's all one language and one contract."
Turning to the marketplace as a whole for financial institutions, Lopes says, "We may be seeing the beginnings of a hard market. It is a very difficult time for financial institutions. There's been an increase in the number of securities actions, to a large degree related to the consolidation and merger activity in the sector."
He continues that they are seeing an increase in claims activity from the insurance company sector as "plaintiffs' firms have gotten much more interested in so-called consumer fraud--marketing and sales practices."
Through most of 1999, there has been "tremendous rate erosion" in the corporate market. "But we're beginning to see some stabilization. Carriers are saying 'no' to some things," Lopes says. However, he does point out that there is little likelihood of a real turn. "The insurance industry is over-capitalized and not just by a little bit. Several new, well-capitalized entities have entered the marketplace. To survive, you need to be nimble and not rely on the market changing quickly. You can't write your way through it."
Lopes concludes that CNA Pro has a "competitive advantage. We're lean and centralized. We've focused on building technology over infrastructure." *
Peter Wilson is expected to be the president-elect of the Professional Liability Underwriting Society by the time this article appears. He served as vice president of PLUS during the 1998-1999 year.
"This is an industry that I've grown up in and care about. PLUS has a mission to improve the community," Wilson notes. He continues that he believes it is important to give something back to the industry.
"The growth of PLUS has been an amazing story," he continues. "However, it faces some real challenges. The growth has stressed the organization to provide additional services. Given the size of the organization, we compete for dollars that corporations and members spend. We have to find ways to provide good value to members."
Among the areas that he would like to stress are:
-- Strengthening the RPLU program
-- Improving the services on the Web site and increasing the number of services available
-- Continuing to provide value at the conferences
In short, he says, his plans involve "simply picking up where others are leaving off."
©COPYRIGHT: The Rough Notes Magazine, 1999