Ask the Underwriter: What is “step rating” and how does it affect my premium?

Each month, we will feature "Ask the Underwriter." In this edition, Wilma S. Fields, CPCU, CIC, Vice President and Underwriter, answers a new question frequently asked by our insureds and potential insureds.

This month, she tackles "What is 'step rating' and how does it affect my premium?"

Step rating is one element in the calculation of the premium for lawyers’ professional liability insurance.

When you first establish your coverage, the policy is written without coverage for prior years’ exposure and provides prospective coverage only. As years of exposure (prior acts) increase, the step rating factor will increase (one for each year) for a five-year period until an insured reaches a “mature” rating.

What is the effect of step rating?

Attorneys early in the step rating process receive a discounted premium. Because fewer prior years are covered, there is less exposure to AIM. Statistically, it takes some time, and in some cases, years, before a claim surfaces. With each policy period renewal, the discount lessens until the matured rate is reached.

Who is step rated?

The most common examples are attorneys who have not maintained continuous coverage or have gaps in their coverage, newly admitted attorneys, and attorneys leaving in-house or government positions to enter the private practice of law. In some cases, multi-attorney firms may see step rating due to the averaging of the attorneys’ step rates.