What Is Claims-Made Professional Indemnity Insurance?
Professional Indemnity Insurance is commonly written on a claims-made and notified basis. This means the timing of a claim—and when you notify your insurer—can be just as important as the professional work that led to it.
In simple terms, a claims-made Professional Indemnity policy may respond when:
A claim is first made against you during the active policy period;
You notify the insurer as required by the policy; and
The claim relates to professional services covered by the policy and performed after the relevant retroactive date.
This is why businesses should not allow PI Insurance to lapse, delay notification of a complaint or select a replacement policy solely on price.
What does “claims-made and notified” mean?
A claims-made and notified policy is generally triggered by the date a claim is made against you and reported to the insurer—not simply the date you completed the work.
For example:
In 2023, an IT consultant completes a systems project.
In 2026, the client alleges the implementation caused financial loss.
The policy active in 2026 may be the relevant policy, provided the claim is notified correctly and the 2023 work falls after the retroactive date.
The fact that you had insurance in 2023 does not automatically determine which policy responds. This is a key difference between claims-made cover and occurrence-based insurance.
Claims-made vs occurrence insurance: what is the difference?
Claims-made Professional Indemnity Insurance | Occurrence-based insurance |
Focuses on when a claim is made and notified | Focuses on when the incident or damage occurred |
Commonly used for Professional Indemnity Insurance | Commonly used for many Public Liability policies |
Requires careful attention to continuity, retroactive dates and notification | May respond where an event occurred during the policy period, even if the claim comes later |
Can leave gaps if the policy lapses or a circumstance is not notified promptly | Still subject to policy terms, conditions and exclusions |
Professional Indemnity Insurance is generally designed to help with claims that professional advice, services, designs or errors caused a client financial loss. business.gov.au guidance
Why is continuous PI Insurance important?
A client may not raise a claim until years after you provided advice, completed a report, delivered a design or finished a project.
If you cancel Professional Indemnity Insurance or allow it to lapse, a claim made afterwards may not be covered—even where the relevant work was completed while you were insured.
Continuous cover is particularly important for professionals with long-tail risks, including:
Architects and engineers
Accountants and bookkeepers
Mortgage brokers and finance professionals
IT consultants, software developers and digital agencies
Business, management and HR consultants
Property professionals, surveyors and designers
When changing insurers, the new policy should be reviewed carefully to confirm it preserves the correct retroactive date and covers your declared professional services.
What is a retroactive date?
The retroactive date is the earliest date from which past professional work may be covered by the current PI policy.
For a claim to potentially be covered, it generally needs to arise from work performed after that date. A claim involving work completed before the retroactive date may be excluded, even if it is made while the policy is active.
This is why a business should confirm its retroactive date at each renewal and when changing insurers.
What is a “circumstance” in PI Insurance?
A circumstance is an event, fact, complaint, allegation, error or situation that may reasonably be expected to give rise to a future claim.
Examples can include:
A client complaint alleging incorrect advice
Discovery of an error in a report, design or calculation
A demand for compensation
A solicitor’s letter
A dispute about a project outcome
A client indicating they intend to seek legal advice or hold you responsible
If you become aware of a circumstance, check the notification requirements in your
policy and contact your insurer or broker promptly. Waiting until formal proceedings start can create a problem under claims-made cover.
What happens if I notify a claim late?
Late notification may jeopardise cover. The exact outcome depends on the wording and circumstances, but claims-made policies often require a claim or circumstance to be notified during the relevant policy period.
Do not assume an insurer will accept a matter after your policy has expired. If you receive a complaint, demand, allegation or indication of a potential claim, seek guidance immediately.
What happens when I retire, sell or close my business?
A claims-made PI policy generally needs to be active when a claim is made. If you retire, sell or close your business, run-off cover may be needed to protect against claims made later in connection with past work.
Run-off cover does not replace a correct retroactive date. The two work together:
Retroactive cover addresses how far back past work may be covered.
Run-off cover provides protection for claims made after you stop practising or trading.
Claims-made PI Insurance: key questions to ask
Before arranging, renewing or changing Professional Indemnity Insurance, ask:
Is this policy claims-made and notified?
What is my retroactive date?
Does the new policy preserve my prior-work protection?
Are legal defence costs included within the limit?
What exactly counts as a notifiable circumstance?
Does the policy cover all services we provide?
What happens if we retire, sell or close the business?
Do we need run-off cover?
Professional Indemnity Insurance for Australian professionals
Claims-made PI Insurance requires more than setting a renewal reminder. Your professional services, policy wording, retroactive date, continuity of cover and claims-notification process should all be aligned.
Clarke Lyons Insurance helps Australian professionals and businesses review Professional Indemnity Insurance, claims-made policy requirements, retroactive cover, policy limits and run-off considerations.
Contact Clarke Lyons Insurance for a tailored Professional Indemnity Insurance review.
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