Professional liability coverage
$21 billion in premium still remains untapped
While there are some 12.5 million accounts that have some need for E&O coverage, only 1.2 million actually have coverage, according to data compiled by MarketStance, Middletown, Connecticut. The majority of those without coverage represent small or medium-sized accounts as indicated by the fact that the 1.2 million covered accounts represent some $11.1 billion in premium, while the uncovered accounts represent $21.0 billion, a not insignificant untapped market.
Not surprisingly, the greatest market penetration has occurred in states and territories where professional liability cases have garnered much publicity. The District of Columbia has the greatest penetration, with 59% of the total potential premium written. It is followed by Texas at 41% and three states with a 40% penetration: Massachusetts, New York and Virginia.
The 12 major classes for E&O coverages have a much better understanding of the need for E&O—indicated by the fact that 64.6% of the potential premiums are written for these classes. That still leaves some $3.74 billion in unwritten premiums—an attractive market potential for nearly any agent or broker. Those classes representing the greatest potential are led by offices of lawyers, where $1.05 billion in premium remains unwritten, despite the fact that 66.8% of this market has been penetrated. This is followed by engineering services, with $725 million in unwritten premium; residential real estate agents and brokers ($624 million); and insurance agents and brokers ($566 million).
For those individuals who, thanks to our recent and continuing economic crisis, are no longer impressed by numbers in the mere billions, then we would add one more telling fact that might frighten even those jaded persons. The uncovered potential liability in this market is an estimated $2.9 trillion, compared with the $2.4 trillion that is covered.
Since the majority of accounts that remain uncovered are small and medium-sized accounts, this is a perfect market opportunity for independent agents. Only 6% of the sole proprietor accounts have coverage, while only 19% of those accounts with fewer than 20 employees are covered. The percentages rise significantly for the larger accounts.
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