When purchasing legal malpractice insurance, some attorneys only focus on price. While this is certainly an important factor, there are several other factors that differentiate insurance companies. One critical aspect that’s often overlooked is the financial strength of the insurance company. This stability and solvency of your insurer can make all the difference when it comes time to file a claim.
What is Financial Strength in Legal Malpractice Insurance?
Financial strength refers to a company’s ability to meet its financial obligations. This strength is even more critical for insurance companies. Insurers collect premiums from policyholders and, from those, must maintain sufficient reserves to cover any potential claims while also managing operational expenses and investments responsibly.
As an attorney, you work diligently to serve your clients. However, even the most careful lawyers can make mistakes. Plus, even meritless claims may require a surprising amount of defense work. Legal malpractice insurance ensures that if an error occurs, you are protected from personal financial liability and that your client receives fair compensation. This coverage safeguards your reputation, provides peace of mind and allows you to focus on your practice without the constant worry of litigation.
Why Does Financial Strength Matter for Lawyers?
- Claims Payment Reliability. The primary purpose of legal malpractice insurance is to provide financial protection when an attorney faces a professional liability claim. If an insurer lacks the financial resources to pay claims, the coverage they sold you is essentially worthless and can be potentially damaging for your reputation and financial well-being.
- Stability During Economic and Legal Industry Downturns. Economic fluctuations and shifts in the legal industry can both impact all industries. It’s no secret that companies with strong financial foundations are more likely to withstand recessions, market fluctuations and other economic challenges. Insurers with weak financials may struggle, go out of business or just leave the hardest markets, leaving policyholders scrambling for new coverage.
- Protection Against High-Value Malpractice Claims. Legal malpractice claims can be complex and high value, requiring significant financial reserves to cover settlements, judgments and legal defense costs. A strong insurer has the resources and risk management strategies to handle large claims without jeopardizing its ability to serve all other policyholders.
- Consistency in Coverage and Service. Financially stable insurance companies are less likely to make drastic changes to their policies, such as limiting coverage, raising premiums unexpectedly or exiting certain markets. They can also invest in customer service, risk management tools and technology to better serve attorneys over the long term.
- Lower Risk of Policyholder Losses. If an insurer becomes insolvent, policyholders may face unpaid claims, delays in settlements or even loss of coverage. While state guaranty funds may offer limited protection, they are in no way a substitute for a well-funded insurance company.
How to Assess an Insurer’s Financial Strength
Fortunately, several independent rating agencies evaluate the financial health of insurance companies, including DemoTech. OAMIC is rated as an A Double Prime insurance company with DemoTech – the highest possible rating.
Checking these ratings before purchasing your legal malpractice policy can provide confidence that your insurer is financially sound.
OAMIC’s Commitment to Financial Strength
At OAMIC, we take financial stability seriously. Our responsible underwriting practices, prudent investment strategies and strong surplus position ensure we can continue providing reliable malpractice coverage for Oklahoma attorneys like you. With more than $45 million in surplus and a long history of delivering consistent dividends to policyholders, we prioritize long-term stability and claims-paying ability over short-term pricing strategies.
When choosing a legal malpractice insurance provider, don’t just look at the price – also consider the company’s long-term financial stability. It’s your best assurance that when you need protection the most, we’ll be here for you.
Author
On the OAMIC team since 2005, Isaac now serves as vice president, director of operations. He is a licensed insurance producer with two bachelor’s degrees from the University of Oklahoma. Prior to his time at OAMIC, Isaac was part of the engineering team that developed banking software for some of the largest banks in the United States.