Protection after your membership has ended
One of the main differences between the two types of indemnity is with occurrence-based protection, your ability to request assistance hinges on the date the incident arising from your practice occurred. With claims-made protection, your ability to request assistance depends on both the date of the incident and the date when the claim or complaint is made.
So, with occurrence-based protection, you can request assistance from any incidents arising from your practice that occurred during your period of membership – regardless of when the actual claim is brought. It’s feasible for a claim to be brought years after you have left membership. You can still request assistance, as long as the incident took place during your membership (although you should still report any claims as soon as you become aware of them).
With claims-made protection, you can request assistance for any claim or complaint relating to an incident arising from your practice that occurred, and is reported, during your membership period. Once your membership ends, you’re not protected for any claims made against you, even if the incident occurred when you were a member (unless you have purchased Extended Reporting Benefits, as explained below).
In addition to being in membership when an incident has taken place, you also need to tell your indemnifier about the incident as soon as you become aware of it.
Claims-made protection: what are Extended Reporting Benefits (ERBs)?
With claims-made protection, an extra feature is ERBs – or Extended Reporting Benefits, which is sometimes known as tail cover. If you retire or end your membership with your indemnifier, there is still a risk of claims or complaints being made against you, relating to incidents that occurred during your membership. This can happen many years after you have stopped practising.
ERBs are important as they enable you to ‘extend’ the period of time you are eligible to request assistance after your membership has ended. If you choose not to purchase ERBs, and you later find out about an incident that occurred during your claims-made membership, you would not have the right to request assistance. Purchasing ERBs offers continued protection for a fixed period of time (dependent on the period of the ERB).
The price difference between claims-made and occurrence-based indemnity
Another key difference between occurrence-based and claims-made protection is how it is priced.
Occurrence-based protection is priced in a way that predicts the expected cost and frequency of future claims, based on the work you do in the year in question. This also includes any claims that may come to light after you have stopped practising.
Initially claims-made protection is charged at a lower amount than occurrence-based protection – because in effect, you are only paying for protection against incidents arising from your practice (and complaints or claims reported) during those early years when you are in membership. As the years go by, you will gradually pay more, to reflect the greater number of years covered within your membership period.
For example, over a five-year membership period:
In Year 1, you are protected against incidents arising from your practice in that year.
In Year 2, you are protected against incidents arising from your practice in Year 2, as well as Year 1.
The same will be true for Years 3, 4, 5. Every year, your subscription will increase, although after five years the price may plateau.
The subscription fees you pay in the early years are often lower for claims-made protection than they are for occurrence-based. However, with claims-made you may need to pay for additional protection if you leave your indemnity provider or once you retire, so the overall cost of both types of protection is broadly similar over the course of your career.
The value of long-term protection
The costs of litigation can be ruinous, and it’s an unfortunate fact that claims and complaints can be made against you at any stage over a long career. Claims can be made against you when you retire and even after you die, as these can be made against your estate for an incident that occurred while you were practising. This is why it’s important to consider all eventualities and make an informed choice.
See the tables below for a direct comparison between occurrence-based and claims-made protection:
Protection during membership
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Occurrence-based protection Can provide protection when the incident occurs during your membership period (regardless of when a claim is reported).
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Claims-made protection
Can provide protection when the incident occurs (and is reported) during the period of membership or extended reporting benefits.
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Protection after membership
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Occurrence-based protection
With occurrence-based indemnity, you are protected for the period you are a member. So, if someone makes a claim against you years later, as long as the incident occurred while you were in membership and you meet the other qualifying criteria you’re protected, even though you may no longer be a member.
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Claims-made protection
With claims-made indemnity, you are protected against claims that are made during your membership period. Once your membership ends, you're not protected for any claims made against you, even if the incident occurred when you were a member.
You may need to purchase additional protection once you retire, stop practising or change indemnity provider. Extended Reporting Benefits (ERB) ensure you are able to report any incidents that occurred during your membership period, that you became aware of after your membership ended.
Different indemnity providers have different policies in relation to the reporting of incidents and ERB. You should check with them if you have any questions or doubts.
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Pricing
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Occurrence-based protection Occurrence-based protection is priced in a way that predicts the expected cost and frequency of future claims based on the work you do. It takes into consideration claims that may come to light after you have stopped practising.
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Claims-made protection
Pricing for claims-made protection is based on the likelihood of a claim being reported in that membership year alone and usually sees the cost build over time as the risk of a claim increases.
Every year, your subscription will increase, although after five years the price may plateau as the risk of incidents occurring from earlier membership years decreases over time.
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Examples of how you are protected
Doctor A has occurrence-based indemnity and Doctor B has claims-made indemnity. Both have been with the same provider for five years, and have received a claim for an incident arising from their practice which occurred in their fourth year of membership. Doctor A is able to request assistance for the incident. Doctor B is also able to request assistance, provided that the incident was reported at the time it occurred (that is, one year ago).
Doctor C had claims-made indemnity for 20 years and retired five years ago. Doctor D had occurrence-based indemnity for 20 years and also retired five years ago. Both Doctor C and Doctor D have received a claim for an incident arising from their practice, which occurred 10 years ago (that is, 15 years into membership with their indemnity provider). Doctor D is able to request assistance from this incident as the incident occurred whilst they were in membership. Doctor C would only be able to request assistance for the incident if they had purchased an ERB from their indemnity provider.
Doctor E has occurrence-based indemnity and Doctor F has claims-made indemnity. Both started their membership with their indemnity provider in the same year.
Year 1 of Doctor E’s indemnity is priced to predict the cost of future claims based on their work in that year. The same is true for years 2, 3, 4, 5 and so on until retirement.
Doctor E then goes on to retire after ten years of membership with their indemnity provider. They don’t need to continue purchasing indemnity after they retire as their indemnity has already been priced to take into account any claims that may come to light after Doctor E has stopped practising.
Doctor F’s indemnity in their first year of membership is priced to predict the cost of claims based on the likelihood of a claim being reported in that membership year alone. Doctor F’s second year, is priced to predict the cost of claims arising in years 1 and 2 and will therefore increase over time for years 3, 4, 5 and so on until retirement.
Doctor F also retires after ten years of membership and will need to purchase additional protection in the form of ERBs to enable any incidents arising from their practice to be reported during this period of membership.