Understanding your Step Rate Credit

What is a Step Rate Credit? Many attorneys have questions about what the Step Rate Credit is and how it works.

Simply put, Lawyers’ Professional Liability (“LPL”) is rated from a Step-Rating Methodology, which produces a credit issued to you throughout your first six years on a declining scale.

Step Rate Chart

The full premium is reduced substantially in the first year in recognition of the limited exposure associated with the “No Prior Acts” provision of coverage.  Due to this you will see your premiums “increase” each year. Many insureds get the second year’s invoice and question the increase; which may be a surprise, absent understanding this process.

Because of the nature of Lawyers’ Professional Liability (“LPL”) 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 a credit against your base rate premium in recognition of this limited exposure and it reduces your premium during the first six years of coverage.

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.  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.

How does it work?

The Step Rate Credit is applied to the base rate and results in a lower premium during the first six years of coverage. The credit is highest – so your premium owed is lowest – during the first year of coverage and is gradually reduced in each subsequent year as the risk associated with the insurance policy matures. This has the effect of incrementally increasing your premium until the premium is fully mature after six full years of continuous coverage

How much will my premium increase each year?

The Step Rate Credit generally decreases each year. However, your actual overall premium increase may vary based on other underwriting factors such as your claim experience, a change in the limits and deductible purchased, or a change in the overall base rate.

What is a “Retro Date” and how does it correlate to the Step Rate Credit?

Attorneys will have a Retroactive or “Prior Acts Date” associated with their coverage. A Retro Date is a date stated in the Policy that limits coverage to acts or omissions occurring on or after the stated date. Generally, once a Prior Acts Date is established, the attorney cannot ever re-establish coverage for acts or omissions prior to the Prior Acts Date. If the Prior Acts Date for any covered attorney is within 6 years of the inception date of the policy, or within 6 years of the date an attorney joins the firm during a policy period (i.e. a lateral hire), a Step Rate Credit will be applied to that attorney’s base rate premium, thus reducing the premium paid.

If you have questions about your Step Rate credit, or your policy in general, please contact us at
(405) 471-5380 or 1-800-318-7505