Paul Sanchez
Medical malpractice insurance is an important way to protect yourself from the financial and emotional costs of a medical malpractice lawsuit. When choosing a medical malpractice insurance provider, it is important to select one that understands the business risks inherent in medical practices and offers innovative solutions to protect you from emerging exposures, including cyberattacks, data breaches, HIPAA violations, and Medicare reviews. It is also crucial to consider the insurer's financial strength to ensure they have sufficient resources to pay all current and future claims. To avoid vicarious liability claims, be transparent about your insurance needs with your advisor and consider choosing an admitted carrier, as many hospital bylaws require this before granting admitting privileges. Finally, it is recommended to use a broker who specializes in medical malpractice insurance to ensure you get the best coverage for your needs.
| Characteristics | Values |
|---|---|
| Type of insurance | Claims-made or occurrence |
| Insurance company | Admitted carrier (licensed and regulated by the state department of insurance) or a non-admitted carrier |
| Insurance provider | National presence and local experts |
| Insurance coverage | Access to CMEs, online disclosure resources, health literacy tools, personalized risk management services, and patient safety programs |
| Insurance broker | Specializes in medical professional liability insurance |
| Policy limit | Sufficient to cover all possible damages and losses associated with a claim |
| Policy features | Discussed with the broker to ensure comprehensive coverage |
| Payment method | Automatic payments |
| Insurance type | Doctor-owned company or shareholder-owned company |
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What You'll Learn
Understanding the different types of medical malpractice insurance
Medical malpractice insurance is a type of professional liability insurance intended to cover healthcare professionals. It provides coverage to physicians and other medical professionals for liability arising from disputed services that result in a patient's injury or death. Most American doctors face at least one medical malpractice lawsuit in their career, and medical negligence is the third leading cause of death in the United States. Therefore, it is essential for physicians to carry malpractice insurance, and it is required by law in most states.
There are two basic types of medical malpractice insurance policies: claims-made policies and occurrence policies. Claims-made policies are widely available from many medical malpractice insurance carriers. Under a claims-made policy, coverage is triggered when a claim is made against the insured. In other words, a claims-made policy will only provide coverage if the policy is in effect when the treatment took place and when a lawsuit is filed. For example, if a claim is made in 2019 based on treatment rendered in 2015, the 2019 policy responds to the claim. It is important to know your retroactive date under a claims-made policy, and to plan your finances in preparation for buying tail coverage when you cancel the policy.
Occurrence policies, on the other hand, will cover any claim for an event that took place during the period of coverage, even if the claim is filed after the policy lapses. Occurrence policies are now limited to just a few options, with Medical Protective being the main provider for US physicians. Before the 1970s, occurrence policies were standard for medical liability insurance. However, when malpractice claims increased, insurers struggled to match price to risk, and occurrence policies became less common.
In addition to these two main types of policies, there are a few other options for obtaining malpractice insurance. Malpractice insurance can be obtained through a private insurer, through an employer (such as a hospital), or through organizations such as medical risk retention groups (RRGs). Medical professionals employed by federal agencies, such as the US Department of Veterans Affairs, do not need malpractice coverage since the federal government self-insures against liability claims. State and local governments may also provide liability protection for medical employees in certain situations.
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The importance of using a broker
Medical malpractice insurance is a complex and confusing field, even for highly educated professionals. It is a critical decision that can have a significant impact on a physician's medical practice and livelihood. Therefore, it is essential to seek expert guidance when choosing the right insurance coverage. This is where the value of using a broker comes into play.
A good broker acts as your advocate and representative to the insurance company, providing invaluable understanding, advice, and market access. They can save you time by doing the legwork, navigating the complex insurance landscape and finding the best deals and rates that match your specific needs. They can also explain the intricacies of your coverage and be your advocate if issues arise with your insurer. This independence from insurance carriers ensures they give unbiased advice and act in your best interests.
Brokers have access to a wide range of insurance carriers and can help you compare different options to find the most suitable coverage for your requirements. They can also assist in identifying emerging risks and ensuring you are protected against them. For instance, in today's environment, it is crucial to have coverage for cyber threats and data breaches, which a broker can help secure.
Additionally, brokers can provide valuable insights into the financial aspects of insurance. They can help you understand the premium rates and ensure you are getting a fair deal. They can also advise on the financial strength of different carriers, helping you choose a carrier with sufficient resources to pay all current and future claims.
While some may believe that buying directly from an insurance company will save money, this is a common misconception. In reality, the premium cost is typically comparable, whether you use a broker or not, as brokers' commissions are built into the price of the insurance. Therefore, using a broker comes at no extra cost to you but provides numerous benefits that can save you time, money, and potential reputational damage.
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Choosing between doctor-owned and shareholder-owned insurers
When choosing a medical malpractice insurer, physicians must consider which insurer has their best interests at heart. Doctor-owned insurers are governed by people from the medical profession, and this impacts not just the handling of claims, but all the ways an insurer caters to the needs of its member doctors. Doctor-owned insurers give their members a financial stake in the company and have an affinity of interests with those they insure. They can fight for doctors through legislative advocacy and when a physician is sued without interference from outside influences.
Shareholder-owned companies, on the other hand, must produce quarterly earnings per share. They remind their leaders and employees of their targets, and if they don't hit the number, their stock price will be adversely affected. While individual employees in shareholder-owned companies may try their best to support insured physicians, the company's claims resolution process is determined by their ownership structure and their primary obligation to produce earnings for investors. Shareholder-owned companies will settle a case when it makes financial sense for them. For instance, a publicly traded company may decide to settle, even if the doctor wants to defend themselves in court.
Mutual insurers are typically established by an association or group of people with a common interest. They are focused on long-term ways to satisfy their policyholders, who can influence the company's direction and product offerings. As a mutual owner, you will share in the company's success and receive a portion of its profits in the form of dividends. Mutual companies can offer more in-depth experience, highly targeted resources and skilled support than stock companies, which often have a larger customer base and broader coverage offerings.
Physicians who purchase their own malpractice insurance will typically have a choice between either policyholder-owned mutual companies or stock companies, which are owned by their shareholders. When choosing between doctor-owned and shareholder-owned insurers, it is essential to consider the benefits offered by each type of company and select the option that best aligns with your interests and priorities.
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Selecting an insurer that offers the right tools and resources
Medical malpractice insurance is a type of professional liability insurance that helps shield physicians and other medical professionals from medical malpractice claims. It is a crucial aspect of the healthcare industry, impacting the success and sustainability of an organization. Selecting the right insurer is of utmost importance, as it can significantly impact the bottom line.
When choosing an insurer, it is essential to opt for a company that offers the necessary tools and resources to reduce risk and safeguard your practice. Here are some key considerations:
- Claims Management: Effective claims management is crucial. Look for an insurer that provides prompt review of claims by experienced specialists. This ensures that allegations are addressed swiftly and efficiently, reducing stress and disruption for medical professionals.
- Defense and Support: Select an insurer that offers a robust defense strategy and provides individual support during the malpractice claim process. This includes access to legal representation and financial resources to cover current and future claims.
- Risk Management: Choose an insurer that provides personalized risk management services. This may include access to CMEs (Continuing Medical Education), online disclosure resources, health literacy tools, and patient safety programs. These resources help to identify and mitigate potential risks, reducing the likelihood of malpractice allegations.
- Data and Industry Insights: Opt for an insurer that can provide data-driven insights into liability trends within your medical specialty. This information can help improve safety protocols and anticipate emerging risks. Insurers with a national presence and local experts are better equipped to deliver innovative solutions and regional insights.
- Discounts and Credits: Many insurers offer discounts and credits to physicians. For example, insurers may provide reduced premiums for physicians who take risk management courses, join professional associations, have a claims-free record, work part-time, or are new to their practice.
- Specialty-Specific Considerations: Different medical specialties carry varying levels of risk for malpractice lawsuits. Insurers should consider these specialty-specific factors when determining coverage and rates. For instance, physicians in higher-risk specialties like neurology or general surgery typically pay higher insurance rates.
By selecting an insurer that offers comprehensive tools and resources, you can better protect your practice and ensure you have the necessary support to navigate the complex healthcare environment.
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Knowing the financial strength of the carrier
When choosing a medical malpractice insurance carrier, it is crucial to assess their financial strength to ensure they can provide adequate protection from liability. Medical malpractice lawsuits can take years to resolve, and selecting a financially stable carrier is essential to guarantee their ability to support their customers in case of a payout. Here are some key considerations:
Net Income
Net income, or net earnings, is calculated by subtracting total expenses from total revenues. A positive net income indicates profitability, while a negative net income suggests monetary losses. Evaluating a carrier's net income over several years provides a more accurate representation of their financial health.
Loss Ratio and Combined Ratio
The loss ratio is calculated by dividing the total incurred losses by collected premiums and measures an insurance carrier's profitability. However, it does not consider expenses. On the other hand, the combined ratio provides an all-inclusive measurement of profitability, including expenses but excluding investment income. A carrier with a well-managed combined ratio may be better equipped to handle payouts from malpractice lawsuits.
Policyholder Surplus
Policyholder surplus, calculated by subtracting a carrier's assets from its liabilities, represents an insurance carrier's net worth. A carrier with a substantial surplus is generally more stable and better able to withstand downturns in business, increasing their longevity and reliability for customers.
State Guaranty Fund Protection
Choosing an admitted carrier licensed by your state department of insurance provides added security through participation in the State Guaranty Fund. This protection ensures that you are covered even if your insurer unexpectedly declares bankruptcy while you have an open claim.
Long-term Financial Stability
It is crucial to research a carrier's financial strength throughout your business relationship. A carrier's financial situation can change rapidly, and reviewing multiple years of financial data helps assess their stability and ability to cover policies over time.
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Frequently asked questions
There are two main types of medical malpractice insurance: occurrence and claims-made. Occurrence insurance covers events that occur during the policy period, while claims-made insurance covers events that occur during the policy period and are reported while the policy is still in force. Claims-made insurance is more widely available due to marketplace competition and allows for a more accurate matching of price to risk.
Doctor-owned insurers have an affinity of interests with those they insure and can fight for doctors through legislative advocacy without interference from outside influences. They are governed by people from the practice of medicine and are not influenced by shareholders.
It is important to choose an insurer that knows the business risks inherent in medical practices and offers innovative solutions to protect you from emerging exposures, including cyberattacks, data breaches, HIPAA violations, and Medicare reviews. The insurer should also provide tools and resources to help reduce risk, such as access to CMEs, online disclosure resources, health literacy tools, and personalized risk management services.
