How Legal Malpractice Insurance is Priced?
What are step ratings?
When an attorney begins coverage with OAMIC, their exposure is less because the work OAMIC insures has just started. We pass along that reduced risk by giving you a discount on your premium. This discounts is called a “step rate credit.”
Every attorney new to OAMIC coverage enters as a step 1 and moves up one step annually for the first 7 years, until they reach step 7. Your step rate is not a reflection of the number of years you’ve been in practice, only how many years of prior acts are being covered. See our Claims Made Policy Information page to learn more about prior acts.
Because of the nature of legal malpractice insurance claims, the underwriting risk for an attorney does not fully mature until there is approximately 6 full years of prior exposure that is insured. The step rate credit is highest – meaning the premium owed is lowest – during the first year of coverage and is gradually reduced in each subsequent year as the exposure and risk associated with the insurance policy matures. So, your premium owed will increase for those first 7 years as the credit is reduced.
There is a video below that can also help explain step rating methodology.
Who does the credit apply to?
The credit applies to any lawyer who purchases coverage for less than 6 full years of prior acts. This could be a new-to-practice attorney or any attorney whose coverage extends backward fewer than six full years – it is not related to how long you’ve been practicing law. This can also be the case for the lawyer purchasing coverage after a decent lapse or gap in coverage. In many instances, firms may start a new lateral hire without prior acts coverage.
What is a retroactive or prior acts date and how does it correlate to the step rate credit?
Attorneys will have a retroactive or prior acts date associated with their coverage and it limits coverage to acts or omissions occurring on or after the stated date. Your retroactive date is stated in your policy.
How much will my premium increase each year?
Unfortunately, there’s no one-size-fits-all answer to this question. Your premium is based on your unique variables, like your practice area and your chosen limits and deductible. If any of this changes, your premium may change regardless of your step rate. Your premium may also vary based on other underwriting factors such as your claim experience (claim history) or a change in our overall base rate.