Professional liability represents more than $10 billion in premium

Eight industries account for 93% of the total

Professional liability insurance (excluding medical malpractice) provides some $10.5 billion in premium, according to data compiled by MarketStance, Middletown, Connecticut. Engineering and management services represents the two-digit SIC group (SIC 87) with the largest total premium at $3.6 billion in premium coming from 170,458 enterprises. The average premium of $21,000 also represents the largest average, tied with security-commodity (SIC 62), and holding-investment offices. Clearly showing the opportunity for growth in this marketplace, only 10.2% of the enterprises in SIC 87 have professional liability coverage.

Legal services (SIC 81) comes in next with $1.97 billion in premium from 175,962 enterprises. This category has the greatest penetration, with 44.6% of the enterprises having professional liability coverage.

In total, the top eight industries represent some $9.75 billion in premium generated from 922,696 enterprises out of a total of 10,868,522 enterprises in these eight categories, making for a penetration rate of only 8%.

Not surprisingly, the Rough Notes Eastern and Western regions boast the highest average premium per account, with New York at an average per account of $17,000, and Massachusetts ($16,000), boosting the average in the East, while California, with an average premium per account of $20,000 is solely responsible for the high average in the West. In fact, it is the only state in that region with an average higher than $10,000. However, it is the District of Columbia that boasts the highest average premium per account at $31,000. It also had the strongest penetration level at 7%. The total penetration for all U.S. industries is only 4%. (Of course, this includes industries with little or no professional liability exposure.)

The industries with professional liability exposure also show a better than average forecasted sales growth, with the eight largest showing an average of 6.4%, compared with an expected 5.2% for all industries.

Clearly, this is a line of business with growth potential as the penetration level continues to be low and those businesses that have coverage are expected to grow at a faster rate, with concomitant growth in premium levels anticipated.

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