Cost-Effective Ways to Get Malpractice Policies
Cost-Effective Ways to Get Malpractice Policies
By Julie Crawshaw
Insurance carriers have gotten more sophisticated about underwriting malpractice coverage, says James Walsh, senior editor at Silverlake Publishing Company and contributor to Silverlake’s It’s Your Fault, a bestselling book about finding personal and professional liability insurance in a litigious culture.
"They’re doing more homework now, investigating, and asking questions," Walsh says. He notes that while some physicians perceive this as too invasive, careful underwriting makes for more cost-effective coverage across the board. In other words, the thing that annoys them is the very thing that gives them a better bottom line.
"This does make it more difficult for someone who’s had problems in the past to obtain coverage, but that’s only fair," Walsh says. "What carriers are better able to do today than 10 years ago is penalize people who’ve had problems. We’re not talking one or two problems, but repeated malpractice claims. For the average physician—who may find being investigated a hassle—the overall effect of this deeper level of underwriting is more cost-effective protection."
Walsh points out that medical entities usually buy professional liability insurance as well as general liability insurance for all the professionals in their employ, generally combining layers of risk layoff. In many cases, the coverage is as much a mechanism for financing legal costs as it is for covering judgments. "Sometimes the most important thing professional liability insurance covers is the cost of a defense," Walsh says.
Walsh says that individuals are well advised to have their own coverage, but cautions that a specific individual medical malpractice liability insurance policy is likely to be expensive. "In many cases, if the physician is covered by insurance through the employing entity, he or she will have a general liability through an umbrella policy. That isn’t always a good idea," Walsh says. He noted that in most cases, an umbrella liability policy will carve out business-related or professional liability claims, so it’s best to have a medical malpractice liability policy that you own.
"Right now, the market is somewhat soft, meaning that it’s easier to buy coverage now than it has been at other times, say seven or 10 years ago," Walsh says. He attributes this in part to improved underwriting on the part of liability carriers. But he says it’s also related to larger economic issues that are making the money available to write the coverage.
"There’s no question that even for individual coverage the process of structuring layers of coverage has become very sophisticated," he says.
In many cases, a broker will set up even an individual physician with a complex combination of self-insurance, different limits of personal and professional liability insurance, and can structure an umbrella policy that can be surplus over a layer of professional liability insurance.
Essentially, that’s just what a broker is supposed to do. You pay the broker to know the marketplace and be able to determine the most cost-effective way to combine different kinds of coverage to equal in total a zero to several-million-dollar blanket of coverage.
How do you find a good broker? Walsh says you can start from the top down or the bottom up. "Smart people use the Internet to go to Johnson and Higgins or AIG or Alexander and Alexander, then work down from those large brokers who specialize in high-end professional liability to a local broker who can do the same," he says. "Others use the old-fashioned method, which is to ask other physicians whom they use as a broker and select one on that basis."
Walsh notes that buying malpractice coverage is a long way from buying auto insurance or a homeowner’s policy, which has gotten so easy that anybody can find it. The combinations of coverage required to give the most cost-effective protection really require the services of someone who does this for a living. Walsh says it’s possible—but not advisable due to low cost-effectiveness—for an individual professional to contact a managing general agent or carrier directly for coverage, or buy it through a physicians’ professional group association. As in any kind of heavily customized marketplace, the cost differential between malpractice insurance packages assembled by different carriers can be quite significant.
The future of the marketplace has a lot to do with health care reform, Walsh says. "A lot of what’s in government programs has to do with malpractice liability. The trade-off many physicians favor is limited liability in exchange for heavier government regulation. But at a time when across the industry malpractice insurance is becoming more sophisticated and cost-effective, I wonder if that’s a good trade-off." (Julie Crawshaw is a freelance writer in Salude, NC.)
Source
1. James Walsh, senior editor, Silverlake Publishing Co., 2025 Hyperion Avenue, Los Angeles, CA 90027. Telephone: (888) 663-3091. Fax: (323) 663-3084. Web site: www.silverlakepub.com.
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