Glossary

Claims-made basis is a form of reinsurance under which the date of the claim report is deemed to be the date of the loss event. Claims reported during the term of the reinsurance agreement are therefore covered, regardless of when they occurred. A claims-made agreement is said to "cut off the tail" on liability business by not covering claims reported after the term of the reinsurance agreement—unless extended by special agreement.

A claims-made coverage trigger obligates an insurer to defend and/or pay a claim on an insured's behalf if the claim is first made against the insured during the period in which the policy is in force.

A claims-made multiplier is a factor applied to rates used for a claims-made commercial general liability (CGL) policy, depending on how long an insured has been in a claims-made program.

A claims-made policy provides coverage that is triggered when a claim is made against the insured during the policy period, regardless of when the wrongful act that gave rise to the claim took place.

Claims-made reinsurance provides for reinsurance of claims-made policies on a claims-made basis.

A claims-paid policy is a liability insurance policy that is triggered at the time a claim is paid, rather than at the time a claim is first reported (claims-made policy) or at the time the injury or damage occurs (occurrence policy). This approach can offer significant benefits in terms of pricing accuracy. However, since claims will be paid only while the policy remains active, the insured facing a claim cannot cancel the policy while the claim is pending, often for years, unless they are willing to pay the claim out of personal assets.

Claims administrator is a generic term used to refer either to an insurance company claims department or to a third-party claims administrator.

A claims audit is a systematic and detailed review of claims files and related records to evaluate the adjuster's performance.

A claims cooperation clause is a clause in a reinsurance contract that requires the sharing of information between the cedent and reinsurer. In essence, it requires the cedent to provide prompt notice of and cooperate with its reinsurer in the handling of claims and may grant the reinsurer a "right to associate" in the defense of any claim, suit, or proceeding that may involve the reinsurance. The clause may also require written approval by the reinsurer for any compromise or settlement.

Claims leakage (CL) concerns dollars lost through claims management inefficiencies that ultimately result from failures in existing processes (manual and automated). In other words, it's the difference between what you did spend and what you should have spent on a claim. The cause can be procedural, such as from inefficient claim processing or improper/errant payments, or from human error, such as poor decision-making, customer service, or even fraud. CL is often discovered through an audit of closed claim files.