As we continue to dive deep into the realm of professional liability, the next logical topic is your company’s financial condition. if you have not previously purchased professional liability insurance in the past, it is important to have a good idea of what will be expected of you. One thing that every carrier is going to want to see is the financial condition of the organization. They will ask you for your most recent financials for sure, and many times will ask that they be audited. If they are not, it’s OK. They will typically make concessions based on the size and complexity of the organization. That is about where the concessions end.

While the insurance world will typically have a product available for nearly everyone out there, you don’t want to be the person that has to pay exorbitant rates for your professional liability insurance because you are a greater financial risk.

Why do carriers want to see financials?

  • They want to be sure that your company is going to be viable and able to deliver on the promises that you have made to your clients. They do not want to be left on the hook for financial damages claims due to your company’s breach of a contract with its client. This is probably their largest concern. It also ties into your company having an air-tight provider agreement.
  • They want to be sure that you are able to handle the amount of self insured retention or deductible that you have chosen on your policy. Carriers will typically not let you bite off more than your financials show that you can chew. It is important to explore different options, but always be sure you are looking at the risk/reward as we discussed on the post on deductibles and retentions.
  • They want to be sure that you are going to be able to pay your premium! If you are not financially stable enough to pay your premium, you not only put the carrier at risk for offering you an insurance contract with no up-front payment, but if you were to go out of business, you would leave them with possible breach of contract claims. This is the double whammy! Not only do they not get premium, but they have the potential to pay out claims dollars. Not good.
  • The most compelling reason is that a company’s financial condition is a direct correlation to the frequency and severity of claims they will experience.  Underwriters have become very good at making this correlation which is why it dramatically affects the pricing.

Most companies that I have dealt with do not understand the need for financials as part of the underwriting process. Hopefully after reading this post it is somewhat clearer to you. Insurance companies are certainly charged with the same objectives of any other company and that is to make money. By providing them with an accurate and healthy financial picture of your organization, you are affording yourself the best opportunity to receive the most favorable pricing on your insurance product.

To learn more about pricing or to obtain a quote for Professional Liability Insurance, CLICK HERE.

 David R. Carothers, CIC, CRM is a Risk Management Consultant and Licensed Insurance Agent with Praxiom based in Tampa, FL. To contact David Directly, please email him at