How Medical Professional Liability Insurers Work

Medical professional liability insurance is a complex necessity for practicing medicine today. Its purpose is to protect your reputation, livelihood and assets by defending you against claims and making payments in settlements or judgments. The right insurance partner will also advise you in risk-management skills that enhance your productivity, improve patient safety and reduce the occurrence of claims and lawsuits. To understand how medical liability insurance serves you best, it is helpful to know how rates are set, and how insurance companies operate. Setting Rates According to MAG Mutual Insurance Company, one of Alabama’s medical liability insurers, “The losses are the losses — and the losses drive the rates.” When a policy is purchased, there is no way of knowing the actual cost of a future claim. The loss expenses are calculated using past experience to predict future settlements and judgments. Premiums, dividends, risks, etc. are based on probabilities and statistics and are divided into three general areas. More than half of the premium is earmarked for claims payments in the near future. About twenty-five percent pays for defense costs, and the rest covers insurance company expenses and policyholder services, profit, contingencies and investment income. Just as insurance varies from physician to physician, the type of specialty, experience and geographic location also affect premiums. The claims handling performed by Alabama medical liability insurers, along with the judicial environment, the population makeup and public perception contribute to lower Alabama losses, which mean lower premiums. “Alabama physicians’ premiums are about one-third of what physicians in the Florida panhandle pay, and about half of what Georgia physicians pay,” says Vic Adamo, President of ProAssurance. Once a Claim is Made The medical profession is a high-risk field and statistics bear witness to the fact that all physicians are subject to medical liability claims regardless of their specialty or expertise. While the emotional toll can be stressful and devastating, your insurance company should help you negotiate the claims process and mount the best legal defense. Most insurance carriers have policies and procedures to advise you when threatened by a claim. When you consider Medical Protective’s statistic that an average claim could take up to seven years to resolve after the initial incident, it is in your best interest to work closely with your insurer and to stay within their guidelines. Procedures regarding notification of the insurance carrier, collecting all important medical records, limiting discussions regarding the claim and working with the claim representative and legal team are part of the process and vary from company to company. You should also investigate how much input you will have in the defense, how aggressively your provider pursues the claim, past litigation results and the financial stability of your insurer to mount the best possible defense. While these are the practical steps to follow after a claim is made, what happens to your premiums afterward? The Rate Cycle Premiums are developed locally and renewed annually. During a policy year that a claim is made, your premium cannot increase. However, upon the renewal date, your premium may rise, but by how much and for how long varies from company to company and specialty to specialty. “The effectiveness of your insurance company will dictate how much you will pay in the future,” says Nancy Stahulak, Medical Protective’s vice-president of marketing. “Plaintiff verdicts, settlements and indemnity payments to the patient can result in increased premiums and may even force you into the expensive surplus market until you’re considered ‘clean’ or claims-free. To put it simply, if your medical malpractice insurance provider loses cases in your behalf, your rates will go up while your revenue will (most likely) go down. If that’s the case, you may end up paying more over the long-run by using a company with a cheaper premium at the outset.” There are steps you can take to reduce your premiums or at least keep them to a minimum. According to Frank O’Neil, senior vice-president, investor relations and corporate communications for ProAssurance, “A deductible can be added to a medmal policy, just like any other insurance, to reduce the premium. Approved continuing education credits, as well as risk management courses, will also help reduce rates.” Upon medical school graduation, you took the Hippocratic Oath which states, in-part, “With purity, holiness and beneficence I will pass my life and practice my art.” Medical liability insurers enable you to continue the work to which you’ve dedicated your life. In partnership with you, they uphold another verse of the Oath: “I will keep them from harm and injustice.” April 2008