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The difference between claims-made and occurrence policies

By Anita Simes, CEBS, Fellow, Insurance Advisor

Medical professional liability insurance is an essential component of a physician’s insurance protection portfolio. This type of insurance is written on either a “claims-made” or an “occurrence” basis, and it’s important to know the differences between them.

In Wisconsin, physicians are required to purchase primary medical professional liability insurance coverage at the levels defined in ch. 655. Wis. Stat. (currently $1 million per occurrence and $3 million annual aggregate). Damage awards in excess of the limit are paid from the Wisconsin Injured Patients and Families Compensation Fund, into which physicians pay an annual fee based on their specialty.

Claims-made policies protect physicians from claims made against them and reported while their policy is in force and after their retroactive date, which usually is the first policy’s effective date. Each renewal policy has a new set of liability limits that apply to claims made during the policy period. As long as a physician continuously renews his or her claims-made policy and keeps the original retroactive date, incidents that occur after this date can be reported to the current policy and the current limits will apply. Premiums gradually increase over a period of four to five years until they reach a mature premium, when premium changes are based on exposure or rate changes.

Policyholders who terminate coverage often purchase “extended coverage reporting” or “tail” coverage. This protects physicians against claims related to services performed during their covered policy periods but reported after they terminated their policy.

Physicians also may purchase “prior acts” coverage from a new insurance company, reflecting the original retroactive coverage date. Insurance companies may offer additional “tail” provisions at no cost to retiring or older physicians. Tail premiums can be costly, so it’s important that physicians understand the options available to them when they end a claims-made policy.

Occurrence policies protect physicians against incidents that occur while their policy is in force regardless of when the claim is reported. Premiums are not “step-rated” like claims-made premiums and must be high enough from the beginning of the policy to cover future claims.

Occurrence policies permanently insure the period of time when coverage was in effect. When coverage expires, any incidents that may have occurred while the policy was in effect will be covered forever, regardless of when a claim is filed with the insurance company. No “prior acts” or “tail” coverage is needed.

Wisconsin Medical Society Insurance and Financial Services is pleased to offer substantial discounts and member benefit enhancements to members insured with its insurance company partner, ProAssurance. For more details on this member medical professional liability program, contact us at insurance@wismed.org, complete this online form or call 866.442.3810.

The views and opinions expressed in this blog are solely those of the author and do not necessarily represent the views of the Wisconsin Medical Society, Wisconsin Medial Society Holdings Corporation or its subsidiaries. Nothing in this blog should be construed as legal, financial or clinical advice.

Anita Simes, CEBS, Fellow, Insurance Advisor

Anita has worked in the insurance industry for more than 30 years and has been with Wisconsin Medical Society Insurance and Financial Services since 2008. She specializes in health promotion/group benefits, specifically working with large, self-funded public sector groups, and has served as an expert witness in arbitration/mediation cases with union/management groups. Anita earned a Bachelor of Business Administration degree with a pre-law emphasis from the University of Wisconsin-Whitewater and obtained her Certified Employee Benefit Specialist (CEBS) designation and fellowship status from the International Foundation of Employee Benefit Plans Wharton School program. She is a member of the International Society of Certified Employee Benefit Specialists and the International Foundation of Employee Benefit Plans.

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