Claims-Made vs Occurrence Insurance Australia

Claims-made insurance generally responds when a claim is first made against the insured and notified during the policy period, subject to the retroactive date and wording. Occurrence insurance generally responds according to when the insured incident happened, even if the claim is made later. Professional indemnity is commonly claims-made and notified, while public liability is commonly occurrence-based.

In a claims-made policy, those four dates, when the work was performed, when the problem was discovered, when the claim was made, and when the insurer was notified, can fall in different policy years, which is why continuous cover and notification timing matter. This guide covers the difference and what can break the chain.

upcover arranges professional indemnity insurance and other business covers for eligible Australian businesses (AFSL 539078).

Claims-made vs occurrence insurance at a glance

How does the claims-made insurance timeline work?

The sequence that matters: professional service performed, problem discovered, claim made, insurer notified. Claims-made and occurrence policies attach at different points in that chain.

Claims-made. The current policy may be relevant where the claim is first made during the policy period, it is notified according to the policy, the original service occurred on or after the retroactive date, and no known-circumstance or other exclusion applies. The work itself may have been done years earlier.

Occurrence. The policy active when the injury, damage or defined occurrence happened may be relevant, even if the formal claim arrives later. Notification obligations and other conditions may still apply.

Claims-made and occurrence insurance: five scenarios that show the difference

These scenarios are illustrative only. They are not real upcover client cases. All outcomes depend on the policy terms, conditions and exclusions.

Scenario 1: consultant error discovered two years later. An IT consultant provides advice in August 2024. The client discovers a flaw and makes a claim in October 2026. The consultant has renewed professional indemnity continuously, with a retroactive date of 2022, and notifies the insurer in October 2026. The PI policy active when the claim was made and notified may be relevant, subject to wording. The original work does not need to fall in the current policy year.

Scenario 2: PI policy cancelled before the complaint. A design firm completes work in March 2025, then cancels PI in June 2026. A client alleges an error in December 2026. The cancelled policy may not respond to a claim first made after expiry unless run-off cover, an extended reporting provision, section 40(3) or another relevant arrangement applies. Stopping work does not end the exposure to claims from past services.

Scenario 3: switching insurers, retroactive date preserved. An accounting firm changes PI insurers in July 2026. The new schedule retains the retroactive date from 2021. A claim arrives in November 2026 about work done in 2023. The current insurer may assess the matter, subject to the new wording, retroactive date, disclosure and notification requirements. The switching-insurer section below covers what to check.

Scenario 4: warning signs before renewal. A client complains informally before renewal. The business considers it minor and does not notify the outgoing insurer. A new insurer takes over. Three months later, a formal demand arrives. The matter may fall into a coverage dispute between the outgoing and incoming policies, particularly if it was a known circumstance that was not disclosed or notified. Do not wait for a solicitor's letter before seeking notification guidance.

Scenario 5: public liability claim after the policy ends. A customer slips at the premises while the public liability policy is active. The injury develops into a formal demand after the business changes insurer. The occurrence-based policy active when the incident happened may be relevant. The claim should still be notified promptly once received. Keep old policy schedules, certificates, incident reports and insurer details.

What is the difference between a claim and a circumstance?

This is a common area of confusion for businesses, and where many notification problems begin.

A claim may include a written demand, solicitor correspondence, court or tribunal proceedings, a request for compensation, or another event defined as a claim in the wording.

A circumstance may include a client alleging an error, a client refusing to pay and alleging defective work, a missed deadline likely to cause loss, discovery of a material calculation error, a regulatory complaint, a request to redo work, or an incident the business reasonably expects could escalate.

The key point: do not assume there is nothing to notify because the client has not yet demanded money. Many claims-made policies require or allow notification of circumstances that could lead to a claim, and failing to notify before renewal can leave the matter in a gap between the old and new policy. The exact definitions and the threshold for notification come from the wording.

What is a retroactive date in insurance?

The retroactive date is the earliest date from which an act, error or omission may arise and still fall within a claims-made policy, subject to the remaining terms. Claims arising from work before the retroactive date are commonly outside the policy's prior-acts cover, subject to the wording.

Australian insurers commonly use one of three approaches:

• Policy inception date. Covers work from the date the first policy started. Common for businesses taking out PI for the first time.
• Specified date. Covers work from an agreed earlier date, which may match when the business was established or when continuous PI cover began.
• Unlimited retroactive date. No specified date restriction is shown, but all other policy terms, exclusions, disclosure requirements and known-circumstance provisions continue to apply.

A practical example: a business has a retroactive date of 2021. Work done in 2023 and claimed in 2026 is potentially within the date window. Work done in 2020 and claimed in 2026 falls before the retroactive date and may not be covered, even though the claim is made during the current policy period.

When you switch insurers, the new insurer may adopt your existing retroactive date, preserving continuity, or reset it to the new inception date. Accepting a later date without understanding the effect can create a gap for past work. Changes in legal entity, trading name, acquired businesses or discontinued services can also affect how the retroactive date applies.

What happens when you switch professional indemnity insurers?

Before changing PI insurers, check the current retroactive date against the proposed retroactive date and confirm that continuity of cover is preserved. Notify the outgoing insurer or broker of any matters that may require notification under the current policy, and answer the incoming insurer's proposal and disclosure questions accurately. Review whether the professional-services definition, entity names and trading names still match. Check policy limits, excess, defence-cost treatment, territorial scope, and whether run-off or extended-reporting options are needed for the outgoing policy.

Switching insurer does not necessarily create a gap. The larger risks are losing the retroactive date, changing the insured-services definition or failing to disclose known circumstances. A retroactive date may reflect uninterrupted cover even where insurers have changed, but the new schedule and wording must confirm it.

Renewing or changing insurers? Compare professional indemnity options through upcover with your proposed retroactive date, services and claims history.

Do you need professional indemnity after retirement, sale or closure?

Retiring. Historic professional work can generate a later claim. Run-off cover extends the reporting window so claims from past work can still be notified. An extended reporting period may serve a similar function, though the terminology and scope vary between insurers. Without an active policy or run-off arrangement, a later claim may not have a policy available to respond. Check what the wording means by run-off, discovery period or extended reporting period rather than assuming the terms are interchangeable.

Selling the business. Check whether the seller retains historic liabilities, the buyer assumes any, the entity continues, the policy includes predecessor businesses, and run-off is required under the sale agreement.

Closing an entity. Cancelling an ABN, company or practice does not by itself prevent someone from alleging loss from earlier professional work.

How can section 40(3) of the Insurance Contracts Act affect a later claim?

Section 40(3) of the Insurance Contracts Act 1984 (Cth) may be relevant where an insured gives the insurer written notice, before the policy expires, of facts that might give rise to a claim. Where its requirements are satisfied, the insurer may not be relieved of liability merely because the later claim was made after the policy period ended.

This provision is not a replacement for following the policy's notification requirements. It does not guarantee cover, does not extend or preserve the retroactive date, and the timing and content of the notice matter. The notice must identify specific facts, not merely a general concern. Consider obtaining legal or insurance advice where there is uncertainty about the content or timing of a notification.

This is general information, not legal advice.

Common reasons a claims-made policy may not respond

1. Notification - Waiting for legal proceedings rather than notifying when the problem first appeared. Notifying after the policy period has expired. Scenario 4 above shows how a known circumstance can fall between two policies.
2. Continuity - Allowing PI cover to lapse, even briefly, which may reset the retroactive date. Cancelling after retirement without arranging run-off.
3. Disclosure - Not declaring known problems at renewal. Changing services without updating the insurer. Omitting a new entity, subsidiary or trading name.
4. Scope - The claim falls outside the insured professional services. The insured entity was not named. The policy limit has been exhausted by another claim.
5. Claims handling - Admitting liability or agreeing to reimburse a client without insurer consent. Many liability policies restrict admissions, settlements or payments without insurer consent, and section 41 of the Insurance Contracts Act addresses contracts containing those requirements. Destroying or altering records.

What should you do when a claim or problem arises?

1. Record the exact date the business first became aware of the issue.
2. Preserve contracts, emails, advice, reports, version histories and file notes.
3. Check the policy's definitions of claim and circumstance.
4. Notify the insurer or broker promptly in writing.
5. Do not admit liability or promise payment without guidance.
6. Comply with legal, regulatory or contractual deadlines.
7. Take reasonable steps to limit further loss without admitting liability or prejudicing the insurer's position.
8. Keep the insurer updated as new information arrives.

This is general information, not legal advice.

Professional indemnity renewal checklist

Have your profession, turnover, services, current retroactive date, claims history and policy schedule ready, then explore professional indemnity insurance through upcover. Availability and terms depend on insurer acceptance.

How upcover can help

Claims-made means the policy must be active when the claim is reported, not just when the work was done. The retroactive date, continuous cover, circumstance notification and run-off arrangements all shape whether past work is protected. Getting these right at purchase, renewal and retirement is the practical priority.

upcover is a digital-first insurance broker helping Australian small businesses get the right insurance without the paperwork or phone queues. upcover arranges professional indemnity insurance for eligible Australian businesses, with access to 80+ insurance partners.

For choosing between professional indemnity and malpractice cover, see Medical Malpractice vs professional indemnity insurance. For guidance on selecting the right PI policy, see how to choose professional indemnity insurance.

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upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078.

Frequently asked questions

What is the difference between claims-made and occurrence insurance?

Claims-made insurance generally responds when a claim is first made and notified during the policy period, subject to the retroactive date. Occurrence insurance generally responds when the insured incident happens during the policy period, even if the claim is made later. The policy basis determines which insurer and which policy year may be relevant.

Is professional indemnity claims-made in Australia?

Commonly yes. Most Australian professional indemnity policies operate on a claims-made and notified basis, though the exact wording varies between insurers. Management liability, D&O and cyber policies are also commonly claims-made. Public liability is typically occurrence-based.

Can a claims-made policy cover work completed years ago?

It may, where the work was performed on or after the retroactive date and the claim is made and notified during the current policy period. Continuous, uninterrupted cover and a preserved retroactive date are what protect past work under a claims-made structure.

What happens if I switch professional indemnity insurers?

The new insurer may adopt your existing retroactive date, preserving prior-acts protection, or it may set a new retroactive date at inception. Notify the outgoing insurer of any matters requiring notification, answer the incoming insurer's proposal accurately, and confirm the professional-services definition still matches your work.

What is the difference between a claim and a circumstance?

A claim is usually a formal demand or legal proceeding. A circumstance is a situation or fact the business is aware of that could lead to a claim. Many claims-made policies require or allow notification of circumstances, and failing to notify before renewal can leave the matter in a gap.

Do I need professional indemnity after I retire or close my business?

Past professional work can generate a later claim. Run-off cover or an extended reporting period may extend the reporting window so claims from past services can still be notified. Without an active policy or run-off arrangement, a later claim may not have a policy available to respond.

What does section 40(3) mean for a claims-made policy?

Section 40(3) of the Insurance Contracts Act 1984 (Cth) may be relevant where an insured gives written notice before the policy expires of facts that might give rise to a claim. It does not guarantee cover, does not extend the retroactive date, and is not a substitute for following the policy's notification requirements.

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_{The information in this article has been prepared without taking into account your individual needs, objectives or financial situation. It should not be relied upon as personal advice, and it does not constitute legal advice, including in relation to the interpretation of policy wordings, the Insurance Contracts Act 1984, retroactive dates or notification requirements. Cover types, policy bases, inclusions, exclusions and wording vary between insurers and policies. All insurance products arranged through upcover are subject to the terms, conditions, limits and exclusions contained in the relevant policy wording and Product Disclosure Statement. Before deciding whether a particular insurance product is right for you, please read the relevant PDS and consider your personal circumstances. upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078. upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.}