Short Answer
NNot necessarily. Revenue is an important rating factor in an A&E E&O premium, but it isn't the only one, and carriers don't treat it as a simple one-to-one calculation. A firm's revenue could increase 20%, 50%, or even 100% without the premium increasing by that same percentage. The actual outcome depends on the carrier's rating methodology and the other characteristics of the account.
Why revenue growth and A&E E&O Premium growth don't move in Lockstep
Professional liability exposure generally increases as a firm performs more professional services, which is why revenue is commonly part of the underwriting calculation. But carriers also weigh other factors at the same time, including professional discipline, project types, location, claims history, and how revenue has been reported on past applications.
Because of that, a firm can grow its revenue significantly in a given year without seeing a matching jump in premium, and the reverse can also be true. A firm with modest revenue growth but a shift toward higher-severity project types might see a larger increase than the revenue number alone would suggest.
A firm's revenue could increase 20%, 50%, or even 100% without its A&E E&O premium increasing by that same percentage.
What else can affect your A&E E&O Premium
When a firm's revenue increases, other things about the firm often change too, such as new project types, new clients, new geographic territories, or additional staff and disciplines. Underwriting may be responding to those changes as much as to the revenue figure itself. Because of that, a firm can grow its revenue significantly without seeing a matching increase in its A&E E&O premium.
Example
A structural engineering firm's revenue grows 25% year over year. The firm assumes its professional liability premium should increase by roughly the same amount.
At renewal, the actual increase is smaller. The firm's project mix and claims history stayed consistent, and the carrier's methodology didn't treat the revenue increase as a direct one-to-one driver of premium. In a different scenario, a firm with the same 25% revenue growth but a new expansion into higher-severity project types might see a larger increase, because more than revenue changed.
What to check when your A&E E&O Premium increases
If your A&E E&O premium increased after revenue grew, look at:
- What other underwriting factors may have shifted alongside revenue, like project types or client mix
- Whether your claims history changed during the same period
- Whether your firm’s reported revenue on the application was accurate and supportable
- Whether the carrier’s stated rating factors were explained to you at renewal
- Whether comparing multiple years of applications shows a clearer pattern than looking at just this year
Related Questions
If my revenue doubles, will my A&E E&O Premium Double?
Not automatically. Revenue is one input among several, so a large jump in revenue doesn't guarantee a proportional jump in premium.
What if my revenue increased but my premium increased by more than that percentage?
That can happen if other underwriting factors changed too, such as project types, claims activity, or geographic exposure. It's worth asking the underwriter what specifically drove the increase.
Should I report lower projected revenue to keep my premium down?
No. Projections should be reasonable and supportable based on what's known at the time the application is completed, not adjusted to try to influence pricing.
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