By switching to a different professional indemnity insurance (BAV) policy, you can sometimes save a considerable amount. In addition, things can simply change over the years that a business is active. New clients, more staff or a higher turnover: sometimes the current BAV insurance is no longer sufficient and switching is the right choice. If you want to switch, there are a few things you need to know. This page describes the situation in the Netherlands.
Cancelling BAV insurance
Before switching BAV insurance, the current policy must be cancelled. With many BAV insurers, the insurance can be cancelled at any time after the first year. In that case a notice period of one month applies. The policy conditions also often state that cancellation must be made in writing. We always recommend cancelling by registered letter. That is still the safest option.
Some insurers are more flexible and do away with the first term of one year. With them, it is always possible to cancel the insurance with a notice period of one month. Here too, we recommend using a registered letter.
In any case, consult the policy conditions to check the exact cancellation procedures and periods.
Prior acts risk and run-off risk with BAV insurance
An important point to watch when switching BAV insurance is the prior acts risk (inlooprisico) and the run-off risk (uitlooprisico, sometimes also called tail risk). This is the situation where a claim is submitted when the insured person has already joined a new insurer, while the damage arose when they were still with the old insurer. Checking that no gap arises is essential when switching BAV insurance.
About prior acts risk and run-off risk
Prior acts risk relates to claims that come in after the start date of the BAV insurance, but relate to events that took place before the start date.
Run-off risk, on the other hand, relates to claims that come in after the end date of the BAV insurance, but relate to events that took place before the end date.
How prior acts risk and run-off risk relate
Most BAV insurers work on the claims-made principle, under which the moment the claim is submitted determines whether or not the insurer provides cover. In principle, the prior acts risk is then dealt with and there is no run-off risk, but deviations are still possible. In addition, run-off risk remains important if no new insurance follows, for example on retirement or when a self-employed professional (zzp'er) returns to employment.
In any case, when switching to another BAV insurer, it is advisable to check whether the run-off risk or prior acts risk is covered. More and more insurers offer cover for run-off risk, and in most cases it can still be bought off. The number of years of prior acts cover or run-off cover is also important. Many policies, for example, provide prior acts cover of 3 to 5 years, which will not be enough for all claims.
Also bear in mind that this can have consequences if broader or narrower cover is agreed with the new insurer. It is then very important to know which insurer (and under which cover) will pay out for such historical claims. The policy conditions often say something about how the two relate to each other.
How switching BAV insurance works
Switching BAV insurance is not that complicated, but there are clearly a number of things the insured person needs to watch out for. The step-by-step plan below shows what the insured person needs to do.
- Choose a new BAV insurance
Enter into a contract with a new BAV insurer and make sure that this new insurance starts just before the old insurance ends. With good prior acts and run-off cover, one uninsured day is in principle not a disaster, but unnecessary risks do no good. Check straight away whether the prior acts risk is properly covered.
- Cancel the old BAV insurance
Use a registered letter to cancel the old BAV insurance. Keep a copy and proof of postage, and ask the old insurer to confirm the cancellation. In principle, the BAV insurance ends 30 days after cancellation.
- Agreement on the run-off risk
If the prior acts risk is not sufficiently covered by the new insurer (for example, the period is too short), it is advisable to buy off the run-off risk with the previous insurer. This must be reported before the insurance contract ends. The insurer then sets the rates, and if an agreement is reached, the risk can then be bought off. Some policies include run-off cover as standard, in which case you are covered just as well.
Conclusion on switching BAV insurance
Switching to a different BAV insurance is not difficult and can result in considerable savings. Often a short notice period of just one month applies. However, you do need to take the so-called prior acts risk and run-off risk into account. To prevent problems, it is therefore advisable to consult the new liability insurer carefully in advance. Sometimes the run-off risk is not covered as standard, but it can be bought off. It is advisable to make use of this option.
Read also: Comparing professional indemnity insurance.
Frequently asked questions about BAV insurance
Why is prior acts cover of 3 years not always enough?
The general limitation period in the Netherlands is twenty years. In other words, there is a risk that a very old claim comes in, while the new insurer only covers damage that arose up to three years before the new insurance contract took effect. That is why it is advisable to arrange good run-off cover with every BAV insurer.
Which conditions must my BAV insurance meet?
In principle, BAV insurance is not compulsory and freedom of contract applies: the policyholder and the insurer decide the content of the insurance themselves. In some cases, however, specific requirements apply to BAV insurance. This is the case, for example, for mortgage intermediaries. They must have BAV insurance that covers at least €460,000 per event and at least €750,000 per year (2020).
What is the difference between BAV insurance and CAR insurance?
CAR insurance (Construction All Risk), also known as construction and erection insurance (bouw- en montageverzekering), is a construction insurance for clients and contractors. It primarily covers damage to the works themselves during construction or assembly, for example due to theft of materials, storm or an execution or design error. Liability can be added as an additional section (Allianz, CAR insurance). Professional indemnity insurance only provides cover when the insured person makes a professional error and causes damage as a result, such as an architect who makes a drawing error.
Does BAV insurance also cover damage to property or people?
Usually not. BAV insurance covers financial loss. For damage to property or people, there is business liability insurance (AVB).
What is the difference between regular BAV insurance and professional indemnity insurance for self-employed professionals?
In both cases it is BAV insurance, but the latter is better suited to the needs of self-employed professionals, who often have lower turnover and no staff. The cover is often more limited and the premium lower. That does not automatically mean that every BAV policy for self-employed professionals is a better choice. Comparing the content remains very important.