Insured asks what is “Step Rating”? Did not find term defined or mentioned in my policy.
Response:
Lawyers Professional Liability Insurance policies are written “claims made” policy form. Most Claims Made Policies are Step Rated. At policy inception of a law firm's 1st "claims made" Lawyers Professional Liability Insurance policy there are no past acts to cover. During the first few years of “claims made” coverage the exposure increases as each continuously renewed “claims made” policy covers more years of past acts. The rates increase to match the exposure over those first few years. A term used to describe this process is commonly called “Step Rating”. Over the 1st 3 to 5 years, sometimes a little longer, a good rule of thumb is that the premium will double from the 1st year's premium. This is true for any Lawyers Liability Insurance Policy with any insurance carrier. Generally the policy will become “fully rated” in 5 to 7 years..
Once the firm's policy becomes “Fully Rated”, the only changes in premium should be because of claims history of the firm; changes in the areas of practice; and/or changes in the general insurance environment.
If you switch insurance carriers, the “Step Rating” does not start over as the firm should maintain it prior acts date.