During the first year of claims-made, coverage is provided for incidents arising from treatment provided in the first year that are reported in the first year. The second year of claims-made coverage provides for incidents reported during year two resulting from treatment provided in year one or year two of the policy. The third year of claims-made coverage provides for incidents reported during the third year of coverage resulting from treatment provided in years one, two or three. Each year the likelihood of a claim being reported grows. This increase in exposure is reflected in the pricing of the policy.
The cost of claims-made coverage increases incrementally each year during the early years of coverage. This is referred to as the “claims-made step factor” and is due to the cumulative effect of claims reported each succeeding year. Eventually, the number and cost of claims reported levels off. When this leveling off occurs, usually at the fourth year, the mature claims-made rate has been reached.
The step factor is a percentage of the mature claims-made rate and is used to calculate the premium for claims-made coverage.
Claims-Made Step Factors*
| Year of Coverage |
Percentage of Mature Claims-Made Rate |
| Year 1 |
35% |
| Year 2 |
54% |
| Year 3 |
94% |
| Year 4 + |
100% |
* Factors are subject to change based on company experience and
Pennsylvania Insurance Department prior approval.
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