Claims Made

Certain policies - particularly professional indemnity - may be sold on a Claims Made basis. This means that the claim is covered by the policy in force at the point the claim is made, which could be a different policy to the one in force when the incident giving rise to the claim occurred. The insurer is therefore taking on a significant risk when offering a new policy, because they will be covering events that occurred prior to the policy starting if they result in a claim during the policy period.

One of the features of Claims Made policies is that cover needs to continue for some time after the insured risk has ceased. For example, if a firm of solicitors was to close, they would need to continue professional indemnity cover for several years afterwards, because poor advice given in the final year of trading may result in a claim several years later. This is usually accomplished via the purchase of run-off cover.

The alternative mechanism is Claims Occurred.