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How to Compare Professional Liability Insurance (Errors & Omissions) Proposals: A Practical Spreadsheet Guide

Professional liability insurance (Errors & Omissions, or E&O) proposals can look almost identical on the surface — limits, deductible, and premium — but the underwriting language, exclusions, retroactive dates, and claim-handling nuances drive real-world value. This practical guide shows brokers, procurement teams, and business owners in the USA (with examples for New York, California, and Texas) how to structure a comparison spreadsheet, score proposals objectively, and make the best buying decision.

Why a spreadsheet matters

A structured spreadsheet turns opinions into data. It forces you to:

  • Compare apples-to-apples across carriers and broker proposals.
  • Quantify the trade-off between premium, retention, and coverage features.
  • Identify hidden costs (sublimits, consent-to-settle clauses, defense inside/outside limits).
  • Create a defensible vendor selection record.

What to capture: the essential columns

Create one row per proposal and include these columns (each becomes a filterable column in your spreadsheet):

  • Proposal ID / Carrier / Broker
  • Quote date
  • Insured name / Location (city/state)
  • Policy form: Claims-made vs Occurrence
  • Retroactive date (if claims-made)
  • Limits (each claim / aggregate) — e.g., $1,000,000 / $1,000,000
  • Premium (annual)
  • Deductible / Retention
  • Defense: Inside vs Outside limits
  • Sublimits (privacy/PCI, contractual liability, punitive damages)
  • Prior acts coverage / nose coverage
  • Consent-to-settle clause (yes/no; details)
  • Extended reporting period (ERP) options & cost
  • Exclusions called out (contractual liability, cyber, patent, etc.)
  • Claims history disclosed (# of claims last 5 years; open/resolved; amounts)
  • Financial strength rating (AM Best / S&P)
  • Brokerage fees / commission
  • Notes / endorsement availability
  • Initial qualitative score / weighted total (see scoring below)

Weighting & scoring: turn coverage into a number

Not all fields are equal. Use a weighted scoring model (out of 100). Example weights:

  • Policy form & retro date: 15
  • Limits & sublimits: 15
  • Defense costs & consent-to-settle: 15
  • Premium vs deductible (value): 15
  • Claims handling & insurer reputation: 15
  • Exclusions / endorsements flexibility: 10
  • Broker advocacy / placement strength: 10
    Total = 100

Score each row 0–10 per criterion, multiply by its weight/10, and sum. This produces a normalized score enabling side-by-side ranking.

Spreadsheet formula tips (Google Sheets / Excel)

  • Normalize premium: to compare different limits, compute premium-per-$1M of limit:
    = premium / (limits_in_millions)
  • Convert deductible to expected cost using a probability multiplier:
    Example expected annual deductible impact ≈ deductible * claim_probability. Use conservative claim_probability = 0.02 for mid-risk professions.
  • Score composition:
    =SUM(score_policy_form1.5, score_limits1.5, score_defense1.5, score_price1.5, score_claims_handling1.5, score_exclusions1.0, score_broker*1.0)
  • Use conditional formatting to highlight red flags (e.g., retro date later than inception date, high sublimits).

Key coverage items that change value (and must be in the sheet)

  • Retroactive date (claims-made): a retro date after the start of your exposure leaves past work uncovered.
  • Defense inside vs outside limits: defense outside limits preserves limits for indemnity — usually preferable.
  • Consent-to-settle: carriers that retain absolute settlement control can settle without your consent; flag this for sensitive professional exposures.
  • Sublimits for privacy/tech: if you provide IT services, a $250k privacy sublimit vs $1M can be a deal-breaker.
  • Regulatory fines & penalties: many policies exclude fines; you may need a cyber/privacy policy.
  • Prior claims and open reserves: large open reserves or frequent small claims raise renewal costs — include claim summaries.

Example comparison table (sample data for illustration)

Carrier / Broker Location Limits Annual Premium Deductible Defense Retro Date Sublimits AM Best Suitability
Hiscox (online) San Francisco, CA $1M / $1M $900 $2,500 Outside inception $250k privacy A Small consulting firms — fast online bind [Hiscox]
The Hartford (broker) New York, NY $1M / $1M $1,200 $5,000 Inside 01/2018 $500k privacy A+ Professional services, strong claims service [Hartford]
Chubb (wholesale) Houston, TX $2M / $2M $4,800 $10,000 Outside prior acts included $1M privacy A++ Larger firms, high-limit specialty risks [Chubb]

Sources and pricing examples reflect typical ranges and representative product positioning from insurer websites and market guides (see links at end). Use actual quotes for procurement decisions.

Real-world pricing ranges (USA, 2024 estimates)

  • Solo/sole practitioners / low-risk consultants: $400–$1,200/year for $1M/$1M limits. (Sources: Insureon, Hiscox)
  • Small firms with moderate exposure (revenue $500k–$5M): $1,200–$6,000/year for $1M/$1M depending on services and claims history.
  • Larger or high-risk professions (architects, technology firms with IP exposure, large advisory practices): $5,000–$50,000+/year, and specialty carriers (Chubb, CNA, AIG) dominate high-limit placements.
    Sources: Insureon, The Hartford, carrier product pages.

Quick references:

Location-specific considerations (NY / CA / TX)

  • New York: heavier litigation environment and higher defense costs mean higher premiums — expect 10–30% above national medians for similar exposures.
  • California (San Francisco / Los Angeles): strong plaintiff bar for tech-related claims; privacy exposures may drive higher privacy sublimits or add-on cyber policies.
  • Texas (Houston / Dallas): generally competitive pricing but industry concentrations (energy, healthcare) can skew rates for specialty practices.

Add a “jurisdiction multiplier” in your spreadsheet: 1.0 = baseline, 1.15 = NY, 1.10 = CA (tech-risk), 0.95 = less litigious locales.

How to handle broker fees and commission transparency

Record broker fees separately. A $1,200 premium with a $300 broker placement fee should be evaluated as $1,500 for first-year economics. Flag contingent commission arrangements that may create conflicts.

Red flags to flag automatically (conditional rules)

  • Retroactive date later than your business inception.
  • Defense inside limits + large deductible = double hit.
  • Extremely low premium relative to peers (<30% of competitor average): probe for coverage holes or high sublimits.
  • Carrier AM Best rating below B++ (or lacking rating).
  • Vague exclusions or “we may exclude later” language.

Example negotiation levers

  • Ask for defense outside limits instead of inside limits — carriers will often trade a $500–$1,000 premium increase for this.
  • Request expanded privacy sublimits or a separate cyber endorsement — a targeted endorsement can cost $250–$1,000 annually.
  • Bundle with other lines (D&O, cyber) to access better credits — use your broker to negotiate multi-line credits.

For more on negotiation and broker selection, see:

Closing checklist before awarding

  • Verify claims-made retroactive date includes your prior acts.
  • Confirm extended reporting period cost and duration.
  • Validate defense cost treatment and consent-to-settle language.
  • Confirm sublimits for privacy/Cyber/Contractual exposure are acceptable.
  • Check carrier financial strength and ask for claims-handling references for your industry.

A disciplined spreadsheet approach removes guesswork and clarifies trade-offs. Capture complete proposal wording (endorsements and exclusions) in your procurement file — the cheapest premium wins only if coverage is truly equivalent.

Sources

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