Professional indemnity insurance (E&O / professional liability)

Professional indemnity insurance covers a business or individual against claims of financial loss caused by their professional advice, services or errors.

The policyholder is a firm or professional whose service, rather than a physical product, can cause a client financial harm through a mistake, an omission or negligent advice. A carrier prices and takes on that liability in exchange for premium, and reinsurers typically stand behind the carrier for larger claims. When a client alleges loss from bad advice or a botched service, the policy funds the legal defense and any settlement or judgment, up to the policy limit.

It exists because professional errors rarely show up immediately and often surface well after the work is done, which is why these policies are usually written on a claims-made basis tied to when the claim is reported rather than when the mistake happened. A common confusion is treating it as interchangeable with general liability, which covers bodily injury or property damage rather than financial loss from professional judgment. Coverage terms, exclusions and the scope of "professional services" vary widely by occupation, so wording is negotiated rather than standardized.

In insurance technology, this line shows up in embedded and point-of-sale products that let agencies, marketplaces or software platforms attach professional liability coverage to another purchase, and in underwriting tools that assess an applicant's claims history and scope of services to price the risk quickly for smaller firms that historically had trouble finding coverage at all.

Written by Insurtech Daily.