Should we switch from claims-made to occurrence coverage?

Occurrence coverage responds to incidents that happened during the policy period, whenever the claim eventually arrives. Once a year is covered, it stays covered, and nothing you do later can undo it.

Claims-made responds only to claims first made and reported while a policy is in force, and only for incidents after the retroactive date. As long as you renew continuously with an unbroken retro date it behaves much like occurrence. The difference only bites at transitions, and transitions are common in this class.

A hard market moves programs. Operators change markets more often than they used to, and each change is a chance for the retroactive date to advance and for years of operations to fall outside coverage without anything on the declarations page indicating it.

Occurrence removes that failure mode permanently. It also removes the tail purchase decision at a sale, a closure or a change of ownership, which is a real transaction cost that sellers routinely under-budget.

Occurrence coverage in senior care is scarcer and generally more expensive than claims-made, and in the hardest segments it may not be offered at all. That is not carriers being difficult: writing occurrence in a class with a long tail and rising verdict severity requires reserving for exposure a carrier cannot yet see.

So for many operators the question is academic. Where it is available, compare the premium difference against what a tail would cost at exit and against the value of never having to check a retro date again.

This is the part that goes wrong. Occurrence covers incidents from its inception forward. It does not cover incidents that happened while you were on claims-made, because those are the old policy responsibility, and the old policy stops responding when it expires.

So the switch requires either tail coverage on the expiring claims-made program, or an occurrence policy endorsed with prior acts back to your first continuous coverage. Without one of those, you have bought a structure that protects the future and abandoned the past, which is worse than what you had.

Ask for the program quoted both ways, with the tail cost on the expiring claims-made program stated explicitly so the comparison is complete. A claims-made premium that looks cheaper stops looking cheaper once the eventual tail is priced in.

And ask what happens at renewal after the switch. An occurrence program that is only available for one year, after which you return to claims-made, has created a covered island rather than a solution.