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Claims Made vs. Occurrence: Understanding the Insurance Trigger and Policy Differences
Understanding the fundamental difference between 'claims-made' and 'occurrence' policy triggers is important for any business.
Simplfied Summary
Why “Insurance Triggers” Matter?
One of the most important distinctions in commercial insurance is whether a policy works on a claims-made basis or an occurrence basis. This single difference determines when the policy responds, which in turn affects how long you need cover, how claims should be notified, and what happens if the policy is cancelled or allowed to lapse.
For many businesses, this distinction is not obvious until a claim arises. Yet it is critical. Professional Indemnity, Technology PI, D&O, and other liability covers for financial loss are written on a Claims Made basis. Whereas, Public Liability and Employers’ Liability, by contrast, are written on an Occurrence basis. Understanding the trigger is therefore important to understanding your protection and your obligations.
The “Core” Difference
In simple terms, “Claims Made” insurance is concerned with when the claim or circumstance is reported, while “Occurrence” insurance is concerned with when the underlying incident happened.
Defined: Claims-Made Policy
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An insurance policy that provides coverage for claims that are made and reported during the active policy period.
Defined: Occurrence Policy
An insurance policy that covers losses that occur during the policy period, regardless of when the claim is eventually reported.
The “Claims Made” Timeline
A claims made policy responds to claims that are made against you during the policy period, not necessarily when the work or error originally occurred. This is why “Claims Made” insurance is particularly suited to professions where a mistake may sit undiscovered for months or years before anyone suffers a loss or raises a formal allegation.
For example, a consultant may give flawed advice in 2024, a software house may deploy defective code in 2025, and the issue may not emerge until 2027. Under a claims-made structure, the policy in force in 2027 is potentially the one that responds. But that only works if the policy has the correct Retroactive Date and there has been continuity of cover.
The Importance of the Retroactive Date
The Retroactive Date is typically found on your Schedule and is the date from which the insurer is willing to pick up work performed before the claim was made. If the work giving rise to the claim took place after that date, the current policy will respond. If the work was performed before the Retroactive Date, the claim will be excluded.
The Run-Off Requirement
A “Claims Made” policy only protects you while there is a policy in force to receive the claim. That means if you cancel the policy, close the business, retire, or sell without arranging Run-Off cover, your ability to notify a claim will be lost.
Run-off cover provides an extended reporting period to notify claims or circumstances you become aware of. For professional services, this is essential to ringfence the exposure for clients that may seek to make a claim against you in the future.
Frequently Asked
Questions
When to notify a claim under a “Claims Made” policy?
Under a “Claims Made” policy, you are typically required to notify your insurer as soon as you become aware of a matter that could reasonably give rise to a claim. This may be a complaint, an error you discover, a failed deliverable, or any issue you’re aware could mean a future liability under the policy.
"Notify your insurer as soon as practicable" is a standard clause in insurance policies requiring policyholders to report incidents, accidents, or potential claims promptly, typically without unnecessary delay, often within 14 days or immediately.
Even where no formal claim has yet been made, reporting the details of the circumstance promptly will allow you to meet your obligations under the policy. Failing to do so can lead to insurers refusing to pay a claim, as late notification is one of the most common reasons for claims being declined.
Why is Public Liability “Occurrence” based, while PI is “Claims Made”?
Physical accidents (slips and falls) are typically identified when they happen, the "occurrence" is clear. Whereas, professional errors (negligent advice, design, or specification) are "Long-Tail" risks that can lie dormant for years before they cause financial loss. Insurers use "Claims Made" triggers for PI because it allows them to price the risk more accurately.
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