While soft market pricing continues to challenge many in the professional liability marketplace, coverage enhancements and increased attention to emerging risks are likewise capturing attention.

For instance, says Michael De Feo, RPLU, ASLI, vice president at wholesale brokerage NIF Pro, a division of NIF Group, “Architects & engineers is pretty much as soft as it gets. Carriers seem to be keeping prices down to prevent accounts from walking away.”

Susan Harker, product line leader, A&E Professional Liability, for Insight Insurance Services, concurs. “New, inexperienced entries to the market are offering coverage at a sub-market price in an attempt to gain market share.” The problem with that, she remarks, is, “It typically takes these firms three years to either correct their rates or drop out of the market as claims start to come in.”

Harker adds, “While most architectural firms, particularly those specializing in the residential sector, continue to see downward pressure on billings, we’re seeing a slight rebound for engineering firms, often those involved in government work or infrastructure design, who expect billing increases for fiscal 2011.”  

The pricing story is similar for accounting professionals. “The accountants market continues to see new entrants,” says Kim Stone-Vilim, CPA, product line leader, Accountants Professional Liability, for Insight Insurance Services, “and pricing is extremely competitive. Some new carriers are attempting to use an Internet-based platform to write the business and minimize and/or eliminate the use of retail agents.”

Financial institutions are a mixed bag. “They are harder to generalize, because there are so many variables,” De Feo notes. “Each account is unique. Pricing has leveled out, but interest in professional liability coverage is up in certain segments, including smaller investment fund managers.”

Various factors play into pricing levels. “While rates may be soft, I don’t see them as horribly soft,” De Feo says. “For instance, on renewals, prices are relatively stable. Prices are off most where an insured is having a down year and revenues have dropped. That’s more common than rates being slashed.”

In the midst of pricing pressure, coverage issues also are front and center, at least in some segments. “One newer development is network security insurance—insurance for consequences of a breach where an insured’s data may be compromised,” says Leib Dodell, chief executive officer, ThinkRisk Underwriting Agency, a unit of Ryan Specialty Group. “Businesses are recognizing the potential cost of notifying their customers who are impacted by a security breach.”

De Feo has also seen increased interest and attention to tech-related issues in miscellaneous E&O. “We’re seeing added coverages for cyber liability, Internet media liability, and security and privacy,” he explains. “These have been standard coverages for tech businesses, but we’re seeing other companies more interested now, due to news coverage about data losses and lawsuits.”

Network security issues represent a timely opportunity for agents and brokers. “The product has been in the marketplace for a couple of years,” notes Dodell, “but it seems that this year, buyers and brokers are really taking it seriously and making the decision to buy, as opposed to just kicking the tires.”

A surge of legislative activity and media attention form the foundation for the opportunity. “New so-called ‘red flag rules’ require certain types of businesses to have security standards,” Dodell explains, “and they impose penalties and liabilities for noncompliance.

“What is interesting—and good for agents and brokers—is that network security issues cross all industry segments,” Dodell adds. “Historically, discussions were generally restricted to companies in the media or technology space. Today it’s an exposure that impacts every business that maintains data, which is every business.”

Social networking drives other professional liability concerns. “Companies are doing so many more creative things around social networking, whether on Facebook, Twitter, blogs or other communication tools,” Dodell says. “Businesses realize that these tools are critical to grass roots marketing, but they bring with them professional liability risks. In essence, these businesses are now media companies, but they may not be covered for the exposures that go with it.”

Opportunities also exist in the broader market. The continued soft market may allow agents to save good risks some money. “We are looking at new business accounts where the insured has been paying twice what they needed to pay,” says De Feo. Often, these accounts have not been to market for some time. “When we quote it, we save them a ridiculous amount,” De Feo adds.

Of course, a soft market can be a two-edged sword. “With upwards of 40 companies writing in the A&E professional liability marketplace, agents face the dilemma of determining the best match between insureds’ needs and the coverages offered,” says Harker. “Agents must solicit quotes from a greater number of markets in response to client requests to shop for a better price. This increases agency workloads and can undermine company relationships, as underwriters are inundated with submissions.”

With her observation, Harker offers advice: “It is important for agents to educate clients that the least expensive option is not always best. Though the premium may be attractive, placing an insured with a market that lacks experience in a complex marketplace could cause the insured more harm in the long run.”

The situation is similar for accountants professional liability. “Accountants, probably more than any other professionals, are aware of the economy’s impact on all types of businesses, including their own,” Stone-Vilim remarks. “Many firms are shopping, and agents must be educated on coverages and options available, so they can present the best match for their insureds.”

Again, the challenge of carrier placement comes into play. “Agents need to place coverage with a carrier that is financially stable and dedicated to the professional liability market,” Stone-Vilim asserts. “Agents should work with carriers that have a responsive staff with expertise in their applicable lines.”

Retail agents looking to grow their professional liability business can start their information search online, at least for data on network security. “There is a great Web site, privacyrights.org, that offers a chronological listing of virtually every data breach they’re aware of,” says Dodell. “It’s a tremendous source for agents and brokers to get a handle on exposures facing specific industries, no matter what business they serve.”

ThinkRisk also offers its own online resources. “We have written a series of ‘white papers,’ again with information by industry,” Dodell explains. “We discuss the liability issues, types of data and consequences faced by businesses in these industries. It’s a great tool that makes it easier for agents and brokers to lead prospect conversations on the issues.” The firm also offers a weekly e-mail of thought-provoking information on professional liability issues.

Industry groups also can be a valuable resource for retailers. “Organizations like PLUS (Professional Liability Underwriting Society) are very useful in helping to educate agents and brokers on a range of professional liability issues,” Dodell says. The organization features national conferences and symposia, as well as online education and local chapter events.

Carriers, program administrators and wholesalers are also ready to help retail agents and brokers become informed about professional liability exposures and coverages. “It is important for agents to understand client coverage needs, but it’s also important to recognize the value carriers offer,” notes Harker. “Experi­enced underwriting professionals can help in determining the unique coverage requirements of a particular insured and finding a carrier willing to manuscript endorsements to properly cover the exposure.”

Finding a carrier that offers contract review service and advice “hotlines” is an additional boon, Harker adds. “This gives agents more time to focus on other business needs and ensures that the feedback given to the client is specific to their carrier.”

Stone-Vilim encourages agents to understand how different carriers operate. “Agents should inquire as to what type of pre-claims assistance is available,” she says. “Does the carrier offer engagement letter review and risk management services? How responsive is the carrier? How quickly can an agent get a quote, talk to an underwriter or get a binder? These are all important issues that impact the customer service agents give their clients.”

Wholesalers also stand ready to help retail agents and brokers. “Research available wholesalers, screen them, and then choose based on merit,” De Feo advises. “Understand the wholesaler’s approach, its areas of expertise and its markets, and then build a relationship. A wholesaler who knows a class of business can compare coverages and find the best value for retailers and their clients.”