Claims-made insurance policies have existed since at least 1964. They were designed, in part, to solve the problem of a lag between the wrongful or erroneous act of a professional, the discovery of the loss, and the time that loss is reported to the insurer.
Claims-made policies were created to avoid the actuarial uncertainty of a claim occurring in one policy period being reported in a subsequent policy period. In essence, they provided indemnity for claims first made against the insured during the policy period.
The following quotes a five-part series I authored over a decade ago examining the history and latest developments of the claims-made form in the Insurance Journal.
Yet the concept, as simple as it may seem, is in fact rather complicated, especially at or around renewal. This is because the above is consistent with a "Pure Claims Made Policy" form which, over the past 45 years, has morphed into a form that is a "Claims First Made and Reported to the Company form," possibly with Prior act limitations, and/or Prior-Pending Date limitations and many varieties of "extended reporting" extensions.1
