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The A-B-Cs of A Claims-Made Policy |
As the leading insurer of Illinois physicians, ISMIE offers creative insurance solutions that protect policyholders and maintain reasonable claims costs.
For instance, our professional liability insurance coverage is issued on a claims-made basis so each year you pay only for protection against claims that are reported during the current year.
A pay-as-you-go system
Coverage is provided for claims or suits resulting from professional services rendered on or after the first date of your coverage (known as the retroactive date). To be covered under a claims-made policy, the claim or suit must be reported during the time your policy is in effect.
Coverage ceases when the policy is terminated. Once a policy is terminated, the policyholder is not covered for any claim that might be reported after the termination date — even if a claims-made policy was in effect at the time professional services were rendered (unless "tail" coverage is in place).
How claim-made coverage works
All claims-made policies are based on a series of maturity steps. Your premium is based on two main factors: the likelihood that claims will be reported at a particular stage as well as the projected cost of any claims that will be reported. Over time, the cost of your premium will follow an arc — peaking at a time when claims are most likely to be reported and leveling off when claims and their associated costs level off.
The maturity schedule works as follows:
Year one
This premium is lower than subsequent premiums because the probability that a claim will be reported by a patient that same year is low. When you renew your policy for a second year, the exposure period naturally increases.
Year two
Now your premium will be somewhat higher, taking into consideration the cost of claims that occur and are reported in your second year, as well as claims that may have occurred in your first year but are reported in your second year.
Years three to six
Each year premiums continue to increase in accordance with actuarially projected claims assumptions, until a "mature" level is reached.
Year seven
Your policy reaches a mature claims-made level at the seventh year. At this time premiums tend to even out, reflecting the fact that the cost and number of claims reported has stabilized.
To find out more, call our Underwriting Division at our toll-free number, 1-800-782-4767, or e-mail uwtg@ismie.com.