Disputes over major claims are snowballing as the insurance market continues to harden, law firm Herbert Smith Freehills says.

Claims are “more commonly delayed and often disputed” as insurers’ underwriting profit comes under increasing scrutiny as investment returns slow, the law firm says in a review of the last 12 months.

It recommends policyholders give “very careful consideration to their policy wordings at renewal” and arrange the broadest cover available. It also suggests engaging specialist advisers at an early stage.

“Be assured, insurers will ‘lawyer up’ early in major claims,” it says.

The report says the market will continue to harden throughout this year as insurers deal with economic slowdown, increased losses from natural disasters such as the recent tragic bushfires, and "shifts in the liability landscape".

The directors’ and officers’ (D&O) insurance market experienced “particularly significant continued hardening and volatility” last year.

“There are growing concerns within corporate Australia regarding the ongoing availability and cost of ‘Side C’ insurance within D&O policies to cover companies for shareholder class action claims,” the report says.