Walker & Company
Understanding Step Rating (and Why Your Premium Changes Even When Nothing Else Does)
If you’ve ever renewed your professional liability policy and noticed your premium went up even though nothing “changed,” you’ve probably run into something called step rating. It’s one of those insurance terms that sounds more complicated than it is, so let’s break it down.
What Step Rating Actually Is
Step rating is basically how insurers price your policy as your firm matures. During the first few years of coverage, your policy is only responsible for claims that come from your most recent work — so your exposure is smaller, and the premium is lower. Each year you stay insured, your “prior acts” period (the span of time your policy covers for past work) gets longer. The more years of work the policy is now covering, the more potential claims it could be responsible for. That’s the “step.” Each year adds another layer of exposure, and the premium steps up to reflect that.
How Long It Lasts
For most carriers, step rating levels out after about five years. Once your firm has been continuously insured for that long, you’ve built up enough “prior acts” that the policy is now covering essentially all your past work. At that point, the risk (and therefore the premium) stabilizes — you’ve hit the final step. After that, future increases usually come from other factors — rate adjustments, changes in revenue or areas of practice, or overall market shifts — not step rating.A Quick Example
Let’s say you’re a 3-attorney firm that just opened. You buy your first professional liability policy in Year 1. Here’s roughly what step rating might look like over your first five renewals (assuming your firm size, revenue, and practice mix stay consistent):
| Policy Year | “Step” Level | Coverage Scope (Prior Acts) | Approx. Premium* | Notes |
|---|---|---|---|---|
| Year 1 | Step 1 | Covers new work only | $3,000 | Entry level rate |
| Year 2 | Step 2 | Covers last 2 years of work | $4,200 | Exposure doubles |
| Year 3 | Step 3 | Covers last 3 years | $5,000 | Increases taper slightly |
| Year 4 | Step 4 | Covers last 4 years | $5,600 | Almost mature |
| Year 5+ (mature) | Step 5 | Covers full history | $5,900 | Levels off |
So when you see those steady increases early on, it’s not that your carrier suddenly got more expensive — your coverage is literally expanding each year until it’s fully “mature.”
It Applies to Individual Attorneys Too
One thing that’s often overlooked is that step rating doesn’t just apply to the firm as a whole — it also applies to each individual attorney on the policy.
If you add a new attorney who’s just beginning their coverage history, that person starts at Step 1. Their portion of the premium will step up each year for the first five years, even if the rest of the firm is already fully matured.
For example, if your firm has been insured for 10 years but you hire a new associate this year, your overall renewal might tick up slightly — not because the firm’s exposure changed, but because that new attorney is still moving through their own step rating progression.
In other words, every time you add someone new, you’re adding a new mini “step cycle” within the policy. It’s perfectly normal, but good to keep in mind if your premium increases even when the firm itself hasn’t changed much.Switching Carriers Doesn’t Reset the Clock
This is one of the biggest misconceptions we run into. Switching carriers does not restart your step rating process — as long as your new carrier honors your prior acts date (and every reputable one will), your step level continues where you left off.
In other words, if you’ve been insured for five years and switch carriers in year six, you’re still at the mature rate. You don’t go back to square one.
Where things can get tricky is if there’s a gap in coverage — even a short one. That can cause your prior acts coverage to reset, which effectively would restart the step rating timeline. So as long as coverage is continuous, you keep your mature status no matter which carrier you’re with.The Bottom Line
Step rating is just the natural progression of how coverage expands over time. The first few years come with gradual increases, but after that, things level out and stay pretty consistent.
It’s also worth remembering that if you add new attorneys, they’ll go through their own step process individually — so slight jumps in premium can happen even when the firm itself has long been mature.
Understanding how step rating works doesn’t make renewals more exciting, but it does make them make sense — and that’s half the battle.