Smart Ways to 'Bargain Shop' for MedMal Insurance

These days, most physicians are used to “bargain” pricing for their medical-professional liability insurance. Because I represent physicians, I think that is a good thing.  Physicians deserve a break. But I also advise physicians to stay focused on buying quality insurance and not just on saving a few more dollars. I’ve been around long enough to know that low-quality insurance is often not worth anything at all.

The insurance industry regularly moves from soft to hard ... and back. Right now, we are in a soft market. What we don’t know is when it will swing back from soft to hard. This soft market has been longer than most. That would suggest a correction…at some point. Because there are many complex drivers of insurance cycles, NO ONE can predict the timing.

At this point in the dialogue my physician friends’ eyes usually start glazing over. Why is any of this important to me? Things are good now. I’ll always have competitive insurance options, right? So, who’s going to win the big game this week?

Physicians Beware: Market Changes, Insurance Shortages
The fact is, things can change quickly. I’ve been there. I recall an episode in 1996 (yes, we had electricity back then). I had several hundred physician clients insured with a small risk retention group. This insurer was growing rapidly, had great staff, and had decent financials. Then, out of the blue, I received a phone call from a friend in NY with a credit facility serving insurers. He asked what I knew about this insurer. That raised red flags for me. Shortly after that, this insurer restricted its underwriting focus. This move was out of character for a quickly growing insurer. That was enough for me to begin working on a financially-sound replacement insurer for my clients. Shortly after that, the department of insurance put the risk-retention group into receivership. Fortunately, I had been able to move all of my clients prior to that.

I recall how very competitive the insurance market was in the years leading up to 2001. If anything, that market was softer and more competitive than today’s market. There was also heavy structural change underway in healthcare due to managed care. There was heavy merger and acquisition activity. So, those times really did resemble what is happening today. Then the 9/11 tragedy hit. This severely impacted the financial markets and restricted reinsurance capacity. The domino effect eliminated several billion in underwriting capacity from the medical-professional liability market. Major insurers like St. Paul, Frontier, and Phico all left the market. Almost overnight, we were facing a very hard market.

What this meant for physicians was a mad scramble for insurance. In many cases, this meant ANY insurance. Physicians previously insured with low-rated or now-defunct insurers could not find coverage that would include prior-acts. This meant they went “bare” for prior care that could result in claims “today.” Other physicians were able to find replacement coverage, but at much higher prices.

My Advice for Physicians
There are several things you can do to take advantage of current market conditions that will position you well for rapid change:

1. Buy quality. The single most important thing you can do to put worries in the back of your mind is to place your insurance with a highly-rated insurer. Finding that “home” now and building a track record with an insurer that will be there for the long haul means less chance of disruption when the market inevitably shifts. Assuming you’re a good “risk” the insurer will want to keep you.

2. Avoid distractions when selecting your insurance. Insurers are offering no-cost add-in coverages in this competitive market. I think that is fine as long as you don’t make your overall purchase decision based on those “freebies.” A good example is cyber insurance. Most MPL insurers these days are offering “no-cost” cyber insurance featuring $50,000 to $100,000 limits. The problem I see with this is that those limits are not enough coverage for physicians who really do have a cyber liability risk. There are very competitive cyber policies out there providing all the services you need to respond to a data breach and at the right coverage levels. The point is, buy quality insurance. Don’t be distracted by “freebies” that are often inadequate.

3. Include a trusted and experienced broker. Consider using a broker to help you evaluate your true risk. Brokers have insight and experience in working with many clients over different market cycles and can help you objectively evaluate your options and plan for the future. Whether you purchase direct or include a broker, you pay the same premium.

Today physicians have a great opportunity to bargain shop for high quality insurance. But this is not Costco. Avoid the “shiny objects,” remember your priorities, and above all, buy up - buy quality.