Why this matters more than most policyholders realise
The policy form determines not just what’s covered, but when coverage applies and who’s on risk at claims time. For most property and liability covers, the policy form is an academic distinction — an event happens, a claim follows, the current policy responds.
For professional indemnity and management liability, the policy form is a practical issue with real consequences at every point the policy changes: when you switch insurers, when you retire, or when the business closes. Understanding the form you’re on is not optional for anyone carrying PI or D&O cover.
The occurrence policy
An occurrence policy covers events that happen during the policy period, regardless of when the claim is made.
Example: A public liability incident occurs in March 2024. A claim is made in September 2026. The policy that was in force in March 2024 responds — even if that policy has long since expired and been replaced by a different insurer’s policy.
Public liability, property, and most commercial lines policies are written on an occurrence basis. The trigger is the event, not the claim.
The claims-made policy
A claims-made policy covers claims that are made during the policy period, regardless of when the underlying event occurred — subject to a retroactive date.
Example: A consulting firm provides advice in 2022. A claim arising from that advice is made in 2025. The policy in force in 2025 responds — not the policy in force in 2022. It doesn’t matter which insurer held the risk in 2022. What matters is which insurer holds the risk when the claim arrives.
Professional indemnity and management liability policies are almost always written on a claims-made basis. This is the standard form for these lines across the Australian market.
The retroactive date
The retroactive date is the cut-off point in a claims-made policy. Work done before the retroactive date is not covered — even if the claim arrives after the policy inception.
Example: A professional services firm buys a new PI policy with a retroactive date of 1 January 2025. A claim is made in July 2025, relating to work done in September 2024. The current policy doesn’t respond — the work predates the retroactive date.
Maintaining a retroactive date that goes back to the beginning of your professional exposure is one of the most important things a PI buyer can do. It’s also one of the most commonly lost things when switching insurers.
The risk when switching insurers
When you switch from Insurer A to Insurer B, all incoming claims during Insurer B’s policy period are Insurer B’s responsibility — for work done after the retroactive date.
If Insurer B only provides a retroactive date from the policy’s inception date (i.e., the day you switch), your historical work — everything done before switching — is uninsured. A claim relating to that prior work arrives during Insurer B’s policy period, but predates the retroactive date. Neither insurer covers it.
This is why the cheapest PI renewal quote is not always the best option. A new insurer offering a lower premium with a retroactive date of “inception only” is providing materially less cover than an incumbent insurer maintaining the historical retroactive date.
Run-off cover when the business closes
When a business closes or a professional retires, claims-made policies stop renewing. But the claims exposure from prior work doesn’t stop — it continues for as long as a client could plausibly bring a claim related to past services (typically six years under limitation periods, potentially longer in some circumstances).
Run-off cover (also called tail cover) extends the claims-made window for a fixed period after the last policy lapses. It’s typically available for 1, 3, 5, or 7 years. Without it, a claim arriving after the policy lapses — for work done while the policy was in force — is uninsured.
Run-off is not inexpensive, but the alternative is personal exposure for the business owner on claims that may arrive years after the business has closed.