The environment for accountants' professional liability (APL) insurance programs continues the trend of the past few years of both expansions in coverage and risk management with many programs. The market is also experiencing some upheaval in relationships between carriers and managing general agencies that may affect client and agent opportunities for new business and renewal placements.
Unsatisfactory underwriting experience has caused some carriers to leave the market, while more stable programs are looking to respond to increasingly complex accounting practices, especially driven by technology and the associated risks.
Most of the available programs offer coverage for small, medium and larger firms as well as the various modes of practice – CPA firms, tax preparers, enrolled agents and bookkeepers. As with all coverage offerings however, the programs have their "sweet spots" in terms of preferred areas of practice, firm size or even geographic location. As only so much tweaking can be done to policy language or supplemental coverage limits for example, carriers and program managers may be instead focus on more aggressive pricing or underwriting considerations in their preferred zones, as well as ease-of-use tools such as short form or self-rating applications, on-line services or automatic renewals.
Two areas where much attention is focused is in privacy/cyber coverages and issues, and the availability of risk management services.
First, there has been a significant increase in available coverage for privacy or data breach incidents in professional liability programs for accountants. Many policy forms now include some sublimit for network or security breach with the opportunity to expand both limits and breadth of coverage by endorsement for additional premium.
Endorsement language may approach the coverage available in standalone privacy/cybercrime policies, providing the opportunity for the producer and policyholder to evaluate the merits and costs of the various coverage options. The risks associated with data breach and cyber security are fluid and expansive and claim experience data is still developing.
The merits of including coverage in an APL policy versus obtaining standalone coverage is beyond the scope of this article. The agent must however carefully evaluate the needs of the accounting practice (such as if they have custodial control of trust accounts where funds can be misappropriated through social engineering fraud), its IT capabilities and management and types of data.
Other considerations should include the consequences of shared limits if all coverage is under one policy, as well as the costs of coverage in the various options. While no one solution works for all firms, it is safe to assume that the intent of a professional liability policy is not to necessarily extend broad coverage to privacy and cyber claims, though again APL policies offering some degree of cyber coverage may be perfectly appropriate for many clients.
Risk Management Services
The second area of focus for many APL programs is in risk management services. Assuming again that there are limitations to pricing and coverage options that can be offered, risk management is one area that allows programs to offer policyholders essential and desired services.
More than "value-added" trifles, accounting practices both large and small are expecting the availability of legal hotlines, pre-claim assistance, webinars, classes, sample professional documents and whitepapers from risk-management websites and other program-provided sources. Policyholders may further benefit from those carriers that offer premium credit for professionals that participate in carrier-approved risk-management programs or earn no-cost CE credits by taking a webinar or class.
Malpractice claims against accounting professionals follow some familiar trends, with tax preparation leading the way. Allegations of malpractice relating to tax work often include failure to timely file returns or forms, take proper deductions, calculation errors and other areas of negligence in the preparation and filing of tax forms and returns. It seems despite the proliferation in accounting software, the human element drives malpractice claims.
Other common scenarios that relate to the availability of coverage include countersuits over fee disputes and suits for unpaid bills. Firms that sue their clients over fees often get sued back for some type of alleged negligence. Underwriters typically take a dim view of applicants who engage in fee suits.
Subpoenas for records and information (subpoena response is often included in the supplemental coverages and different carriers provide differing limits and applicability of a deductible), payroll errors and employee embezzlement (variably covered by carrier) are other common scenarios.
For agents considering placements in the accountants' professional liability arena, there are numerous opportunities to obtain quality coverage, as well as concern about programs in flux. Agents should remember that a typical accountant client is informed and expecting broad coverage from a highly rated carrier providing some form of risk management services.
Becoming familiar with the particular appetites of the programs can guide the agent to a more expedient submission and placement process, as well improve retention.