If you don’t sell insurance to architects & engineers, you could be missing out on “the best clients in the industry.”

That’s how Jim Schwartz, U.S. A&E focus group leader and underwriter at Beazley, describes A&E clientele. “They’re very conscientious, they’re very loyal and they appreciate what their brokers and insurance carriers can help them with and bring to the table,” he says. “They don’t see a policy as just a piece of paper.”

Many A&E firms became more price-sensitive in the wake of the 2008 recession, when “most other things were secondary to frankly saving their businesses,” Schwartz says. But “they will come around again,” he predicts. “I’m already seeing them becoming that relationship-driven, conscientious client they historically have been.”

Want in with this appealing client base? Here’s what you need to know about the A&E insurance market to maintain a competitive edge as an adviser.

Pricing Trends

Barbara Sable, assistant vice president – RLI Design Professionals Program, says that according to current estimates, more than 60 companies are competing for A&E business. “There’s a lot of competition in the industry,” she says. “That is always going to drive rates down.”

“There’s probably unprecedented capacity in the A&E space, just like many other lines, so that’s really preventing any type of trend on positive rate change,” Schwartz agrees. “Rates are pretty well as low as one would expect them to go because we’ve had about five years of substantial competition. Certainly some accounts will see increases and others will see decreases depending on the profile, but overall I expect rate to stay fairly flat.”

A&E insurance can be a volatile line, though, with claims frequency higher than most other professional lines, Schwartz cautions. Some A&E sectors continue to drive extensive claims—and, by extension, above-average rates.

“Most insurers are finding difficulties with claims in the structural engineering arena,” Sable points out. “While they may not be incredibly frequent, when they happen, they tend to be expensive. And one other that’s been historically true is condominiums—for a while, we saw a little bit of a decline in condominium claims, primarily because there was less condo construction. But now, we’re seeing a surge.”

Individual account experience, then, could be even more important for pricing predictions than marketplace capacity. “What firms can expect is rates are relatively flat. That means premium goes up or down, but it goes up or down based on the characteristics of the firm,” says Kevin Collins, senior vice president at Victor O. Schinnerer & Co., Inc., who works with the professional lines division and specifically the A&E program.

Schinnerer underwriters, for example, base A&E underwriting largely on details like revenues, loss experience and risk management practices. “As architects & engineers grow their annual revenues, their premiums increase,” Collins explains. “Then, you overlay that with the individual loss experience for the firm, so its claims history is going to drive pricing in addition to its individual risk management characteristics. Does it use written contracts? Does it have good quality control and assurance processes within the firm?”

How to Sell It

Although insurance pricing could vary significantly between 10 A&E clients, “the broker’s going to see the best number from the underwriter if they dig into the detail of the firm and most favorably represent the things the firm does around risk management, along with how they practice, where they practice and the revenue for the firm,” Collins suggests.

Sable also encourages agents to be meticulous when submitting client information to carriers, noting that RLI underwriters dive deep into application details to make sure agents and brokers represent their A&E risks accurately.

“Occasionally we find that what’s on the website doesn’t really sync up well with what’s on the application, and that’s always going to give rise to questions,” Sable explains. “They may be promoting a service they no longer provide, for example. Or there’s a tiny niche that doesn’t get represented on the application, but they did it two or three years ago. Even if they didn’t provide that service last year but provided it in the past, it still could give rise to a claim.”

One final piece of advice: Always ask your A&E clients for referrals. “Every architect or engineer we work with has consultants,” Collins points out. “Whether it’s interior designers or a kitchen or a lighting consultant, owners are asking for a lot more specialization on their projects. Architects & engineers are engaging a lot of those consultants specifically for their services, and many owners are now asking insurance to be carried all the way down to those sub-consultants.”

For many of those sub-consultants, insurance is a brave new world. “There’s a huge opportunity to increase market share and become more involved in this business by asking architects & engineers what consultants they hire and work with,” Collins says. “That helps fill an agent’s pipeline on prospects because they can write all those firms as well.”

How are coverage developments affecting the A&E insurance market? Keep an eye on IAmagazine.com and upcoming editions of the Markets Pulse e-newsletter to find out.

Jacquelyn Connelly is IA senior editor.