Claims Made Wordings

What on earth is a Claims Made Wording ???

A term used in liability, professional indemnity and or directors and officers insurance policies.
It refers to the policy condition under which the policy will respond to provide indemnity for a claim.
In Explanation: Claims may arise many years after the occurrence of an event. This creates problems for insurers both in terms of rating adequacy and claims reserving. These problems gave rise to the development of “claims made” wordings.
A claims made policy wording requires the claim to be notified to the insurer during the period of insurance, even though the event giving rise to the claim may have occcurred before the inception of the insurance policy.
At the time of taking out the insurance, the prospective insured makes any necessary enquiries to enable them to make a declaration to the insurer, that at the time of policy inception, they are not aware of any present claims, pending claims or incidents which have previously occurred which may give rise to a future claim. Once the insurer is satisfied with insured's declaration, a policy is issued which will indemnify the insured for claims notified during the period of insurance. If an incident occurs during the period of insurance but is not advised to the insured and or the insurer before the expiry of the policy, such event does not find indemnity under the scope of cover of a "Claims Made" policy. If the claim was advised and lodged in a subsequent period, the claim would be made against the policy in force at that time. This type of policy is generally not renewed, but rather replaced each year with a new policy.

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