Claims Made vs Claims Occurring – a GM guide

Published on 
June 21, 2022
Written by
GM Insurance

You’ll often hear two phrases used when talking about insurance - ‘Claims Occuring’ and ‘Claims Made under Liability’. 

We know that insurance terminology can be confusing, yet it’s so important to understand these, often subtle, differences when assessing your own insurance cover. Welcome to the GM guide to doing just that!

What is a claims occurring basis?

An insurance policy on a claims occurring basis means any claims that occur during the policy period, irrespective of when the claim is made. General liability insurances such as employers’ liability, public liability and product liability would often include a ‘claims occurring’ basis.

What is a claims made basis?

An insurance policy on claims made basis meets claims that are made and reported during the policy period for work undertaken after the Retroactive Date shown in the policy (a retroactive date defines the date at which cover was first provided. At each renewal, the same retroactive date is carried forward).

Claims Made basis is fairly common for professional indemnity related insurance, such as medical malpractice, directors & officers’ liability, trustees indemnity and so on.  It is also used as a cover restriction by insurers in respect of liability arising from high-risk products in order to limit their exposure and for some public and product liability extensions, for instance financial loss.

The requirement of a claims made policy can be onerous upon the insured, and the insurer will usually ask for a no claims declaration at each renewal, stating that after investigation there are no known claims or circumstances that could give rise to a claim that has not been reported, signed by a person authorised to make the statement. 

It’s important to note here that failure to report a claim in the correct policy may lead to it being declined. There is no similar requirement for a no claims declaration for a claims occurring policy, but the policy will contain certain conditions that need to be complied with in order for a claim to be met.

What are the main differences between a claims made and claims occurring basis?

The key differentiator between a claims occurring basis and a claims made basis is the extent of residual cover when a policy is lapsed or cancelled. Neither basis will provide cover for claims that occur after the policy has been lapsed or cancelled, even if arising from work undertaken when insurance was in force.  But, a claims occurring policy will cover claims that have occurred during a period of cover even if the claim is made after the cover has been lapsed or cancelled, whereas a claims made policy will not provide cover for any claims after a policy has been lapsed or cancelled.  This means that on lapsing or cancelling a claims made policy, the historic cover paid for has expired and is worthless. This may seem unfair, but it is the only basis upon which insurance is available for some classes of cover.

If you’d like a little help in understanding either of these types of insurance cover, give one of our team a call today. They’ll help you break down your policy so that you are in charge and know exactly what’s what. Call us on 01392 426799 or drop us a line.

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