However, if all twelve claims came from the practice of one attorney who was no longer with the firm, an underwriter may entertain offering a premium rate. Yet, we are not discouraged as we look to the future. Unfortunately, that is the world that we live in today, a different world, fraught with new risks. Such risks weren't high on the probability list before 9/11, but once the unthinkable happened, these risks moved up immediately, and we all had to factor them in. It is a business based on statistical probabilities and client-specific operating history. The insurance business is a profession, like medicine, law, architecture and engineering. We are very proud of what we do and our place in society. Farmers is one of the major "players" in the American marketplace and is proud of its contributions to helping people to achieve their dreams and to get people back to where they belong should an unfortunate incident occur.

But, it's a much needed industry, providing the underpinnings of our society and opportunities for the very economy in which it operates to function and grow. That's because of its very nature of dealing with an intangible product with unknown future costs. Insurance is complex, from the various types of companies, to the multitude of products and services, to the ways in which the products are sold and to the way prices are established. After all, managing risk is our business.

If a law firm in the business of providing estate planning has had twelve claims in the prior three years, this is obviously not a risk a "sound" underwriter would initially consider at any premium rate. An insured's risk is determined, in part, based on their history of losses, usually over the past three full years. Another example of a class would be real estate attorneys.

There are different premium rates for plaintiff attorneys who practice courtroom litigation versus estate planning attorneys who do not practice courtroom litigation. An example is professional liability coverage for the legal profession - lawyers. These rates are actuarially determined, based on the probability of expected claim frequency and severity of losses for exposures within a given class of risk. Premium rates are established by the class (type) of risk.

Many insureds have, at most, a casual understanding of the actuarial probabilities that establish premium rates and have limited knowledge of the staggering amount of fraud that is inherent in the insurance business. Insureds benefit by transferring their risk of loss. The insurance company benefits by charging adequate premium rates to cover its payments for these losses and the expenses of its operations. Insurance transfers the risk of loss due to fortuitous or accidental events by pooling the resources of many for the unfortunate few.