How & when to tell insurers about potential claims

Published: Wednesday, 13 December 2023

Notification of potential claims

Ignoring client complaints can lead to bigger issues.

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Why is the notification process important?

You might think, and hope, that having purchased your Professional Indemnity Insurance policy, you are fully protected in the event of a claim against your firm.

If you receive a complaint that may become a potential claim, you must follow the claim notification requirements in your policy carefully, and completely, to ensure the claim will be accepted by the insurer.

Following significant losses and an upturn in the frequency of claims, insurers have an increased focus on controlling costs. We are seeing notifications go through a more thorough claims investigation process, requiring detailed documentation and cooperation with the insurer. Insurers are being more diligent in scrutinizing potential claims and in confirming that the policy's terms and conditions have been observed. The climate for claims has been tough for some years, and we are being warned to expect an increase in frequency, volume, and severity of claims over the next couple of years as a result of economic factors, recessionary pressures, inflation and general uncertainty.

What can go wrong with notification?

Notifying a potential issue late or incompletely can substantially affect the outcome of professional indemnity claims, impacting both insurers and policyholders.

If you manage your notification process proactively, openly and efficiently, this will be viewed favourably by insurers and minimise the risks of indemnity issues.

If you are insured through a broker with a specialist claims team like Ntegrity, your notification will be to your broker who will liaise with your insurer(s) on your behalf and guide you through the claims process. Some policyholders may not have this ability and will report claims direct to the insurer.

How to notify your claim

1.Timeliness is key:

Timely notification is essential as soon as you become aware of “circumstances” that may lead to a claim. Whether it’s an error in a project, a miscommunication with a client, or any other potential liability, notifying insurers promptly is critical. Late notification can hinder the insurer’s ability to investigate and respond effectively, potentially impacting the outcome of the claim and the coverage provided.

2. What to Notify:

It is important to be diligent in reporting any circumstances that could result in a claim under your professional indemnity policy. You do not need to wait for a formal claim to be brought. 'Any circumstance' includes incidents such as mistakes in the provision of services, breaches of duty, or any situation where a client expresses dissatisfaction that could escalate into a claim.

3. Providing Sufficient Information:

It’s essential to provide detailed and accurate information to insurers about the circumstances surrounding the potential claim. This includes a description of the incident, the parties involved, any relevant documentation, your view on your potential liability and any suggestions for resolving the matter. Clear and comprehensive notifications facilitate a smoother claims process.

4. Open Communication:

Maintaining good communication with insurers is crucial throughout the initial notification and subsequent claims process. It is essential to cooperate fully, respond to inquiries promptly, and provide any additional information requested by the insurer. This collaborative approach helps expedite the resolution of the claim.

5. Continuous Monitoring:

Even after the initial notification, you need to stay vigilant and continue monitoring the situation. If additional information becomes available or the circumstances surrounding the potential claim evolve, it is crucial to provide updates to insurers.

The professional indemnity notification process is a prerequisite for the policy working as you intend when needed. It is vital to be proactive in reporting potential claims/circumstances to insurers, ensuring that the communication is timely, detailed, and complies with legal requirements. By understanding and adhering to the notification process, you and your firm will be able to rely on the protection of your professional indemnity insurance.