Professional Treatment Risk Insurance

Insurance is one of those things we don’t tend to look at in great detail until we need to use it, and with this in mind, to avoid any unwelcome surprises we wanted to provide a breakdown of the important points you should be aware of when it comes to Claims Made policies and Claims Occurring policies as not knowing the difference between the two could be the difference between a claim being paid by insurers, or you being liable to cover the cost yourself. 

One of the most essential forms of cover you will need as a beauty, hair or nail professional is Professional Indemnity or as it’s commonly referred to in your industry, Treatment Liability insurance. These policies are designed to handle claims brought against you by a third party from alleged negligent acts or errors and omissions from your professional services. 

This is separate to public liability insurance which covers, slips, trips, falls and damage to customer property and will specifically say they do not cover claims arising from “Design, Advice, Specification or Treatment” This is quite an important point to note when choosing a policy – if you only have public liability cover, and no treatment risk cover, you could be in for a shock if you need to claim for an injury resulting from a treatment you carried out on a client! 

Professional Indemnity insurance or Treatment risk insurance is a niche product tailored for professionals who offer treatments or advice.  These policies are sometimes written on a “Claims Made” basis, rather than the “Claims Occurring” basis that you may already be familiar with from your normal day to day insurance cover for things like your home and car.   

Claims Occurring policies cover incidents which happen during the period your policy is live (subject to the usual policy conditions being met) e.g. usually from the date you purchase it until the policy expiry date 12 months later – in other words the policy will look to cover a claim if the incident “occurred” on a date within that period. Under English law a claimant has 3 years to make a claim against you for an injury and 7 years for property damage and this is where the difference between Claims Made and Claims Occurring policies really stand out. 

Here is an example of how a Claims Occurring policy would deal with a claim :

Sarah performed an eyebrow tint on her customer Jane, on 1^st March 2017 and Jane suffered an allergic reaction.  Jane accepted a refund for the treatment and nothing further was heard.   Sarah was insured with ABC Insurance from 1^st February 2017 to 31^st January 2018 on a Claims Occurring policy and then moved to XYZ Insurance and had cover with them from 1^st February 2018 until 31^st January 2019 on another Claims Occurring policy.  On 5^th April 2018 Jane is contacted by a no win no fee solicitor who tells her she can claim for up to 3 years after an incident so decides to make a claim against Sarah for the treatment she had in 2017.  The claim letter from the solicitor is received by Sarah on 1^st May 2018.  Sarah contacts her current insurer, XYZ Insurance and they tell her as the incident occurred on 1^st March 2017 they did not insure her at the time the accident happened and are therefore not liable to deal with the claim.  Sarah then contacts her old insurer ABC Insurance and whilst they are no longer her insurer, they were on the day of the incident so they will handle the claim.

Now if ABC Insurance sold policies on a Claims Made basis:

The claim letter from the solicitor is received by Sarah on 1^st May 2018.  Sarah contacts her current insurer, XYZ Insurance and they tell her that as the incident occurred on 1^st March 2017 they did not insure her at the time the accident happened. Sarah then contacts ABC Insurance and they tell her that they only offer cover for claims which are made (as in notified to them) during the lifespan of the policy – so the claim needed to have been made/notified during the period 1^st February 2017 to 31^st January 2018 for them to deal with it. In this instance neither insurer will pay the claim as the claim wasn’t made in time for ABC Insurance’s policy to respond and the incident didn’t occur when XYZ Insurance’s policy was in force so neither are liable and Sarah will have to pay the claim herself.

If she had stayed with ABC Insurance instead of moving to another provider, then the claim would have been covered but she’d moved because she didn’t think the customer service of ABC Insurance was very good anymore. If she had found another insurance company who also sold policies on a Claims Made basis, they may have covered the claim however she would have been expected to tell them about the allergic reaction incident when purchasing the policy even if no claim had been made at that time.

If you move from a Claims Made insurer to a Claims Occurring one, the Claims Made insurer will tell you that you need to maintain cover with them or buy bridging cover to protect against the situation above for 7 years after the claims made policy ends, just in case.  This can mean you are having to pay for 2 insurance policies at the same time.  The price of the first year of a Claims Made insurance policy is usually a lot cheaper than the claims occurring policies but Claims Made policies often increase in price significantly year on year, as it is more likely the insurer will have to pay a claim. This entices people to buy but the low price is simply a result of the small likelihood of them paying a claim in the early days of the policy.

A further important issue with Claims Made policies is that you cannot have a break in cover just in case a claim was to come in. For instance if you stopped working due to maternity leave, retirement, travelling or even pandemic, you would have to keep on paying your insurance premium on a Claims Made policy because if a claim was made during that time and you’ve stopped that policy, then that insurer will not handle the claim. You could therefore not be currently working/earning, and have to find claim and/or legal costs to pay a disgruntled client. A Claims Occurring policy only needs to be in force when you are doing treatments which gives you the flexibility to stop your insurance whenever you want to as it will respond to historic claims as explained in the examples above, giving you peace of mind when you need it most.

Professional Beauty Direct offer claims occurring insurance policies designed for the hair nail and beauty industry, for individuals and salons at competitive prices.  Why not call our friendly knowledgeable team on 0345 605 8670 for a quote today.