The 2025 Insurance Trends Every Design Professional Needs to Know
Claims History and Billings Drive Premium Rates
The National Society of Professional Engineers (NSPE) recently released its annual Professional Liability Insurance Carriers Survey for 2025. Unsurprisingly, claims history and annual billings rank as the most significant factors when carriers are assessing and calculating premium rates.
Expanding Risk Assessments Beyond Claims
Internal Practices Under Increased Scrutiny
Carriers continue to look deeper when assessing the risk profile of its current and potential insureds, however. More than simply counting claims, carriers are evaluating potential insureds’ risk profiles. This means increasing scrutiny of professional firms’ internal practices. For engineers, and others in the design and construction fields, the increasing costs, size and complexity of projects has heightened carriers’ risk assessment. Design and construction professionals would be wise to take note and make efforts to assure their internal practices evolve alongside the design and construction landscape at large.
Project Complexity and Inflation Amplify Risk
Evolving Infrastructure and Workforce Challenges
The pandemic, tariff threats and other inflationary factors have caused project costs to increase significantly in recent years. At the same time, average project size has increased. So too has the need for large-scale infrastructure projects and multi-family/multi-complex residential and commercial developments. Utility work has also seen an increase. Why? Climate factors require upgraded and hardened complex systems for delivering energy, water, natural gas, and other services. These increasingly complex projects are seen as increasing the risk in the liability insurance space. This is compounded by pressures on workforce size and worker availability. Both factors lead to situations where larger, more complex design and build projects are completed by smaller groups. Increasing risk naturally leads to increasing scrutiny on the practices and protocols that are designed to monitor and mitigate risk and risk-causing factors.
Nuclear Verdicts Expand the Scope of Exposure
Verdict Size Influencers Go Beyond Technical Error
To make matters more challenging, the factors leading to increased risk (and increased scrutiny of internal controls) are not limited to the design-and-build space alone. Verdicts have consistently increased in recent years. Carriers are acutely aware that the so-called “nuclear verdicts” are now occurring in more than just a few isolated jurisdictions. When bodily injury is involved, the risk of a nuclear verdict necessarily becomes part of the risk assessment.
Technical errors are obvious targets for large jury verdicts but other significant factors can increase the potential verdict size. This includes: overly aggressive project timelines, vague or unclear contract documents, spotty or incomplete records of project communications, etc. These are the types of issues that allow arguments at trial to claim profit motive and thoughtlessness overshadowed safety responsibilities. Appropriate internal controls help mitigate against these arguments, while also decreasing the risk associated with insuring the project.
Looking Ahead: Emerging Risks and Considerations
Inflation, Climate, and AI Disruption
The risk environment is not likely to calm in the coming years. Social and economic factors are likely to continue driving inflation. Climate change is affecting how projects are completed as are environmental issues, including PFAS and other exposures. Labor and staffing shortages will continue to strain efforts to assure stability and appropriate quality control. And the advancements of AI and AI-assisted tools is only getting started.
Risk Management Strategies for Design Professionals
Contracts, Communication, and Cybersecurity
So how best can you manage your risk profile in the current environment? Reviewing your contract documents to assure that the scope is clear and the timeline is realistic are obvious starting points. So is reviewing your systems and protocols for communicating shared responsibilities and the various stakeholders’ responses and understandings of same. But you should also be considering how developments in contract negotiations may be affecting your risk profile. Is your client requiring that the contract obligate you to perform to the “best” and “highest” standard of care? If so, are you prepared to assume this risk with the appropriate controls in place? If the project requires handling of sensitive data or materials, have you reviewed your cyber security protocols to assure they are current?
Establishing Best Practices for a Resilient Future
It is a good idea to regularly monitor the environment for best practices. This could include: trends in contract language, project communication, quality control, or other factors that increase the complexity of your work and the risks attached to it. It’s important to have a regular process in place to assure that your team is properly educated on the basics of your contracts and risk management system.
While you can never eliminate all risk, you can take steps to mitigate your exposure while lowering your premiums and costs in the process. To consult with an attorney on how to mitigate risk to your business, contact our Insurance Practice Group.
