What is the difference between Claims Occurring and Claims-made insurance policies?

Insurance can be confusing at the best of times, but when taking out cover it is essential that you understand how the cover you have bought works.

Claims occurring and claims made is something most people haven’t heard of before.  It’s an area that can confuse and not understanding the type of cover you have could have further consequences in years to come

With certain trades such as those in the professional sector, for example architects and accountants, would buy professional indemnity cover, this covers legal action that may be taken against them for their professional negligence.
This type of insurance cover is usually based on what’s referred to as a claims-made basis.

A manufacturer on the other hand, having product liability insurance would usually have a policy on a claims occurring basis.
However, this is not always the case.

What is a Claims-Made insurance policy?

These types of policies would pay a claim where the claim has arisen in the policy period only, a policy period would usually be 12 months, and cover would usually begin from the start of the policy year. Cover in some cases may go back further to an earlier point in time, this is called a retroactive date and could go back for many years, as long as there are no breaks in cover, the cover is continuous.

What are Claims Occurring insurance Policies?

These policies are different, a brief explanation would be that should a claim occur that originated sometime in the past, let’s use an Employer’s Liability claim for industrial deafness as the cause. It’s alleged that whilst working for you an individual suffered deafness between the years 2006 and 2010, the insurance company providing that cover at the time would be liable to pay the claim. If you had changed insurers after this time, it would be irrelevant, it’s the insurer responsible at the time.

So, what’s the difference?

A claims-made policy would respond to a claim now if it has occurred in the policy period or further back if the policy hasd been in force for some years.

This is opposite to claims occurring policy where the claim would be made against the policy that was in force at the time.

Are there problems with switching between Claims Made and Claims Occurring policies?

Traditionally Public & Products Liability policies have been issued on a Claims occurring basis. so caution must be taken if moving between the two. However, in recent times there has been a trend with a few insurers to issue policies on a Claims made basis

There is absolutely nothing wrong with this, and certain trades or business types are more suited to it.

So, could a problem exist? Potentially yes, and this is where you need to understand what your insurance is based on.

As an example, your liability policy with, let’s call this ABC Insurance Company was on a claims-occurring basis for many years, at renewal you decide to move insurers to XYZ Insurance Company as the premium is much less than your renewal from ABC Insurance Company.

No problem so far, if a claim occurs that originates in the previous period with ABC, it is they that would respond to the claim, as this is a claim occurring basis. If the claim appears in the current policy year, then your claims made policy with XYZ Insurance would respond to that.

All quite straightforward, however two years further on you decide due to various factors to move to another insurer, but this time you are moving back to a policy that’s on a claims occurring basis same as ABC Insurance Company that you had cover with a few years back.

What could go wrong?

So, this is where the problem lies, because you are moving back to a claims occurring basis like you had with ABC Insurance when you moved to the cheaper alternative, all cover has now also ceased with XYZ Insurance. The previous claims-made basis with XYZ would no longer respond and any claim arising in that period would not be covered.

What is the solution between Claims Made and Claims Occurring?

Quite clearly if you move between the two types of cover you could have a problem in the future At Real we ensure that you know whether the policy we are recommending is on what basis.

A claims-made policy is great as long as you move to a claims-made basis and once you have insurance on that basis it’s advisable that it’s replaced with a policy of the same type.

Do insurers provide an option between Claims Made or Claims Occurring?

Some insurers will only provide cover on a claims-made basis for certain types of industry sectors such as Cosmetics, whilst others have no preference.

With certain insurers now offering both options, it’s important that you first understand what you already have and speak with a specialist on which direction to go.

Wondering which is the right way to go?

Speak to us, we’re not a call centre, we can give you advice based on many years of knowledge and experience in Business Insurance.

 0330 058 0260