Claims-Made vs. Occurrence Policy: What’s the Difference?

The healthcare industry manages varying degrees of risk throughout the year. Liability insurance acts as a safety net to mitigate these risks, but what is the difference between claims made vs occurrence policies?

Learning the difference between claims-made vs. occurrence insurance helps physicians and payors protect themselves from financial losses. These plans can significantly impact all parties’ policymaking and operational functions, so choosing the right one is vital.

Additionally, securing accurate medical records is vital to proving the validity of a claim against a policyholder. However, retrieving Protected Health Information (PHI) can be costly in terms of administrative and legal fees. 

Third-party resources like ChartRequest provide a reliable electronic Release of Information (ROI) platform, allowing insurers to request documents without delay. The article below explores these concepts. After you finish reading, talk to an ROI expert to simplify your record retrieval procedures.

What Is Professional Liability Insurance?

How do doctors, lawyers, and accountants protect themselves when their services cause clients inadvertent adverse outcomes? 

Investing in Professional Liability Insurance is a practical way to reduce the risk of costly lawsuits or penalties. This insurance policy allows professionals to do their jobs without hesitation or fear that even minor setbacks could ruin their business.

A Brief History of Professional Liability Insurance

Insurance companies began selling Professional Liability Insurance in 1896 for personal injury accidents. These policies responded to the anxiety many physicians had about experiencing financial exploitation as they made their services more accessible to the general public. 

Over time, liability insurance evolved to cover a broader range of industries and professions. Here is a list of a few professions that have access to these protections in the modern era of insurance coverage:

• Doctors
• Lawyers
• Consultants
• Accountants
• Engineers
• Real-estate investors
• Insurance agents
• Architects
• Home inspectors

Why Liability Insurance Is Essential for High-Risk Jobs

Professional Liability Insurance is essential for individuals in high-risk professions like healthcare. 

Imagine a doctor making a seemingly harmless mistake that escalates a patient’s condition. Without insurance, the financial consequences of a lawsuit could be devastating. 

According to an AMA report, around 34% of physicians experienced lawsuits at some point in their careers. This statistic highlights the importance of owning liability coverage, regardless of organization size.

What’s the Difference Between Claims-Made vs. Occurrence Coverage

When exploring Professional Liability Insurance, you might come across two particular solutions:

Occurrence Coverage: This insurance covers claims for incidents that occurred while the policy was active, no matter when the claimant files for compensation.

Claims-Made Coverage: This policy covers incidents that occur while the insurance plan is active, but does not provide coverage after the expiration date.

Choosing between claims-made vs. occurrence coverage is critical for physicians and insurance professionals operating in the healthcare sector. Still, professionals who struggle with insurance literacy may not know where to start.

Choosing the Right Policy

As mentioned, picking the wrong type of coverage plan could expose physicians to devastating settlements and lawsuits after even minor treatments. So, which should a doctor choose?

There are a few ways to break down the benefits of each policy. For example:

Occurrence coverage offers doctors peace of mind when switching organizations or retiring. It prevents lingering lawsuits from coming back to haunt these professionals later on or until the statute of limitations expires. 

On the other hand, claims-made policies present more affordable options for upstart healthcare professionals. 

The National Law Review mentions that in some fields, the difference in premiums between the two can be substantial — further emphasizing the importance of making an informed choice.

Results of Making an Informed Choice

Professional Liability Insurance is a must-have for anyone involved in a high-risk or advisory role. The choice between claims-made vs. occurrence policies will significantly impact long-term protection and financial stability. 

For example, claimants resolve 75% of medical malpractice claims before trial due to active liability insurance.

Making informed decisions about liability insurance types can be confusing without the proper resources or assistance. It’s best for healthcare professionals to partner with an attorney or insurance expert to explore every available coverage option.

What Is Occurrence Insurance?

Occurrence insurance is a policy healthcare providers can use to mitigate claims for incidents that occur during the policy period — even if someone makes a claim after the policy expires.

Advantages of Occurrence Insurance

Here are some of the advantages of investing in occurrence insurance plans:

• Continuous Coverage: Provides coverage for incidents occurring during the policy period, even if someone files a claim years later.

• Simplicity: No need for additional coverage, like tail coverage, which may be necessary for claims-made policies.

• Stress Reduction: Healthcare providers can focus on their jobs without worrying about the timing of potential claims.

According to the American Medical Association, weighing the benefits of claims-made vs. occurrence policies is fundamental when successfully negotiating contracts. It is an essential first step in fortifying a business against liability.

Potential Drawbacks and Considerations

While occurrence insurance might seem practical for some, it may have drawbacks worth considering for others. Here are a few examples:

• Cost: Occurrence insurance is usually more expensive than claims-made policies due to the extended coverage period.

• Availability: Not all insurance companies offer occurrence policies, which might limit options for some healthcare providers.

• Compatibility: Occurrence coverage may not provide practical benefits for specialists or other professionals in the healthcare industry who may not need to worry about long-term risks.

What Is Claims-Made Insurance?

Claims-made insurance is a policy that provides coverage when the incident and the claim occur while the policy is active.

If a patient experiences adverse treatment effects and sues the policyholder after coverage ends, the physician may not have protection without a “tail coverage” extension.

Key Characteristics of Claims-Made Insurance

Consider some of the key characteristics of this policy when weighing claims-made vs. occurrence insurance:

• Active Policy Requirement: Claims-made policies must be active when a claimant files for compensation.

• Potential Need for Tail Coverage: Tail coverage is a coverage extension that protects policyholders after their policy ends. However, adding an extension can be expensive compared to alternative, comprehensive policies.

• More Affordable Initial Premiums: Initially, these policies can be more affordable than occurrence policies due to their emphasis on short-term benefits.

Challenges and Considerations With Claims-Made Insurance

Despite the affordability of claims-made policies, specific challenges may dissuade professionals from choosing this insurance solution:

• Increasing Premiums: The cost of this coverage may increase over time. This problem usually occurs in higher-risk sectors of the healthcare industry.

• Changing Demands: A healthcare organization may experience several procedural changes as it expands its business. Claims-made may not provide the necessary coverage to avoid major claims as a facility accepts more patients.

• Laws and Regulations: The legal landscape of healthcare insurance is fickle. It’s important for physicians and insurance providers to monitor changing laws or regulations that may make certain policies — like claims-made coverage — impractical. 

Occurrence vs. Claims-Made Insurance — A Comparative Analysis

Choosing the right insurance for healthcare providers can be like navigating a maze. Each coverage option has pros and cons, so understanding the nuances of each can help you make an informed choice. 

Compare and contrast claims-made vs occurrence insurance using the information below:

Professionals Suitable for Occurrence Insurance Options

Occurrence is advantageous for many professionals, particularly in fields where the effects of service may not be apparent until several years down the line.

Here’s a look at some prime examples:

• Medical Professionals: Doctors, nurses, and other healthcare professionals are at the frontline of patient care, where the stakes are sky-high. An occurrence policy ensures that they can perform their roles efficiently, knowing they have access to coverage today, tomorrow, or several years from now.

• Architects and Engineers: Imagine designing a building that experiences structural deterioration due to environmental factors. Architects and engineers can enjoy occurrence coverage that protects them from unavoidable claims down the line.

• Consultants: Giving professional advice can be tricky, especially when today’s golden nugget of wisdom might become tomorrow’s costly oversight. Whether you’re in management, education, or environmental consulting, occurrence insurance could save your business in the long run.

• Event Planners: Planning an event is like orchestrating a symphony; every note must be perfect. But if something goes awry, even after the curtain falls, occurrence insurance provides adequate safeguards.

Professions That Benefit From Claims-Made Insurance

Here are some professionals that may benefit from a claims-made insurance plan:

• Young Medical Professionals: Those who just entered the medical field may find comfort in the short-term benefits of a claims-made insurance plan. Investing in affordable insurance is an excellent way to balance business expenses while paying off medical school loans.

• IT Consultants: These tech specialists work with everything from cybersecurity to software development. Lower upfront costs can be appealing as they juggle multiple projects.

• Start-up Entrepreneurs: Launching a start-up is exciting, but it’s also filled with unknowns. For those watching every penny, claims-made can be a cost-effective choice.

• Legal Professionals: Lawyers starting their practice or those working in smaller firms might opt for claims-made due to the initial savings, especially when case outcomes can take years to unfold.

• Accountants: With a calculator in one hand and finance reports in the other, accountants often go for claims-made insurance for similar reasons — lower costs at the get-go, with an eye on managing risk.

Choosing the Right Type of Coverage

It’s important to keep several factors in mind before you commit to claims-made vs. occurrence insurance:

• Cost and Budget: If upfront cost is a concern, claims-made insurance might seem more attractive. Yet, occurrence insurance might save the policyholder money in the long run.

• Long-Term Plans: If a policyholder plans to stay in the same place and with the same job, claims-made could work for them. But if you fear claims might come up after you retire or move jobs, occurrence insurance offers broader protection.

• Peace of Mind: For those who don’t want to worry about tail coverage or claims popping up down the road, occurrence insurance provides a solid safety net.

Are You Ready To Retrieve Medical Records Faster?

Finding the right insurance policy is critical, but it doesn’t have to be stressful.

Medical records play a significant role in assessing the risks and validity of claims for policy selection. These documents record a detailed account of care coordination, including dates, treatments, and patient interactions. Elements like these help healthcare providers and payors negotiate the appropriate type of liability coverage for their unique needs.

If you are ready to retrieve medical records faster while maintaining HIPAA compliance, ChartRequest can help! Our extensive network has over 10,000 healthcare providers to connect with during your requests. 

Do you have more questions about claims-made vs. occurrence insurance? Contact ChartRequest to speak with a representative, or try our product demo to see how our software can benefit your insurance company in real-time.