How to Evaluate Claims Service and Reputation for Professional Liability Insurance (Errors & Omissions) Providers

Evaluating a carrier’s claims service and reputation is arguably the most important factor when buying Professional Liability (Errors & Omissions, E&O) insurance in the United States. Price and coverage language matter—but when a claim arises your broker and carrier’s responsiveness, settlement tendencies, and financial strength determine whether a claim is defended, litigated, or settled efficiently. This buying guide (targeted to U.S. purchasers, with examples from New York, California, and Texas) gives a practical framework to evaluate carriers, vendors, and brokers when selecting E&O coverage.

Why claims service and reputation matter (fast summary)

• Claims are where coverage is tested. A carrier’s policy wording may look identical on paper, but claim outcomes differ widely.
• Poor claims service increases total cost of risk. Delays, weak defense, and hard-line settlement positions can lead to larger verdicts and higher indirect costs (reputational damage, lost clients).
• Financial strength matters. A carrier must be able to pay judgments and settlements—AM Best and S&P ratings are primary indicators.

Key metrics to assess (what to measure)

• Financial strength ratings
  • AM Best, S&P Global Ratings, Moody’s—target carriers rated A- (Excellent) or higher for complex professional risks.
• Loss ratio and combined ratio (by product or segment)
  • Lower loss ratios for E&O lines vs. market average suggest better underwriting and claim discipline.
• Complaint index / NAIC complaint data
  • Compare the carrier’s complaint ratio to the industry average via NAIC complaint database.
• Claims closure time
  • Average time to close a claim (in months) for open vs. closed claims—shorter closure times often indicate effective triage.
• Average settlement size and defense spend
  • Helps distinguish settlement-first vs. defense-first strategies.
• Mediation/arbitration outcomes
  • Rates of alternative dispute resolution success indicate flexibility and cost-control methods.
• Breadth of claims team expertise
  • Industry-specific claim handlers, in-house counsel vs. outside counsel panels, and dedicated adjusters for E&O.

Practical steps to evaluate a carrier’s claims service

1. Request documented KPIs from the carrier
   • Ask for: E&O loss ratios (last 3 years), average claim lifecycle length, percent of claims settled pre-suit, average defense cost per claim.
2. Check financial ratings and NAIC data
   • Confirm AM Best/S&P/Moody’s ratings and check NAIC complaint ratios for the carrier by state.
3. Obtain claim examples and references
   • Request sanitized claim summaries for clients in your industry (e.g., A/E firms in California, management consultants in New York).
   • Ask the carrier for references from brokers and insureds in your region (NYC, Los Angeles, Houston).
4. Talk to your broker about the carrier’s claims philosophy
   • Does the carrier litigate aggressively, or lean toward early settlement? How often does it use its own counsel?
5. Ask about panels and counsel selection
   • Evaluate the roster of defense counsel by specialty and geographic footprint (important in states like New York and California).
6. Review policy endorsements that impact claims
   • Consent-to-settle wording, outside-director defense carve-outs, broad definition of “professional services,” and retroactive date clauses.
7. Use a sample claims rubric
   • Score carriers on timeliness, communication, technical knowledge, and settlement approach (see example table below).

Sample carrier comparison (typical small-to-mid market examples — USA, 2024)

Sources for cost ranges and product descriptions: Insurance Information Institute and Insureon market guidance:

• Insurance Information Institute: What is Professional Liability (E&O)? https://www.iii.org/article/what-is-professional-liability-e-and-o-insurance
• Insureon: E&O insurance cost guide: https://www.insureon.com/professional-liability-insurance/cost

Note: Pricing varies widely by profession (architects/engineers command different premiums than consultants), revenue, claim history, and state. In major markets (NYC, LA, Houston) premiums can be 10–30% higher than national average due to higher exposure and defense costs.

What to ask a carrier or broker — claims-focused questions

• “Can you provide loss ratio data for E&O for the last three years, broken down by industry segment?”
• “What is your average time to closure for E&O claims in California and New York?”
• “What percentage of claims are settled before suit, and what is the average settlement amount?”
• “Do you have dedicated E&O adjusters and in-house counsel for professional lines? If not, how do you select outside counsel?”
• “How often has the carrier paid outside counsel’s recommendation to settle against reserves set by claims?”
• “What is your process for handling intakes and initial investigations within the first 72 hours?”
• “Provide sample redacted claim summaries for matters similar to our exposure.”

Red flags to watch for

• No willingness to share KPIs or loss data.
• Low financial strength ratings (below A- AM Best).
• High NAIC complaint index compared to peers in your state (e.g., New York or California).
• Excessive use of reservation of rights without timely litigation strategy.
• Broker-placed assurances without carrier documentation.

Weighing claims service vs. price: a simple scoring model

Use this as a template—adjust weights depending on whether you prioritize claims outcomes or premium costs.

Regional considerations (New York, California, Texas)

• New York: higher defense costs and plaintiff-friendly venues in some counties make carrier selection critical; prefer carriers with strong NYC claims teams.
• California (Los Angeles, Bay Area): tech-related E&O exposures require carriers with cyber/technology expertise; watch for class action exposure.
• Texas (Houston, Dallas): construction-related E&O (A/E risk) and energy-adjacent exposures; carriers with regional adjusters reduce handling lag.

How brokers and carriers can help you mitigate claims risk

• Pre-bind risk assessments and contract review to manage exposures.
• Tailored risk control services (contract wording, audit defense preparation).
• Structured early-warning reporting and claim simulations.
• See how brokers add value: What Good Brokers Do Differently When Placing Professional Liability Insurance (Errors & Omissions)

Next steps checklist (for U.S. purchasers)

• Obtain AM Best/S&P ratings for shortlisted carriers.
• Request KPIs and at least three redacted claim examples for your industry and state.
• Get NAIC complaint index and compare to industry peers.
• Use the scoring model above and prioritize carriers with demonstrable, proven claims outcomes even if slightly more expensive.
• Ask your broker for a written claims-handling SLA and regional claims contact list.

Further reading to sharpen your selection process:

• How to Choose a Broker for Professional Liability Insurance (Errors & Omissions): Questions to Ask
• Red Flags When Selecting a Carrier for Professional Liability Insurance (Errors & Omissions)

Sources and further reference

• Insurance Information Institute — What is Professional Liability (E&O)? https://www.iii.org/article/what-is-professional-liability-e-and-o-insurance
• Insureon — Professional liability insurance cost guide https://www.insureon.com/professional-liability-insurance/cost
• The Hartford — Errors & Omissions insurance overview https://www.thehartford.com/business-insurance/errors-omissions

Bold emphasis on claims service and reputation will save you far more in total cost of risk than minor premium savings when the E&O policy is tested.