When your medical malpractice insurance comes up for renewal, it can be tempting to look at the premium, make sure it hasn’t changed too much, and move on.
I understand. Insurance isn’t exactly something most physicians want to spend a lot of time thinking about.
As you approach renewal, it’s worth taking a little time to make sure your coverage still meets your needs. Practices change. Physicians change jobs, add locations, start practicing in another state, pick up telemedicine work, add new procedures, hire additional providers, or form new business entities.
I’ve worked with physicians and other healthcare professionals on their malpractice insurance for more than 35 years. Here are seven things I think are worth taking a look at before you renew.
1. Don’t Look at Premium Alone
Obviously, cost matters. If your premium increased significantly, you should understand why. And if another insurance company is offering substantially lower rates, you should understand why as well.
But make sure you’re comparing more than the number at the bottom of the page.
Two policies can have the same limits and still provide meaningfully different coverage. How are defense costs handled? Does the policy require your consent before settling a claim? What happens if you leave the carrier? Are there exclusions or restrictions that aren’t in your current policy?
A less expensive policy could be a good option. Just make sure you’re not giving up important coverage to get the lower premium.
2. Look at the Insurance Company Behind the Policy
This is an area I think physicians sometimes overlook.
A $1,000,000/$3,000,000 policy from one insurance company isn’t necessarily the same product as a $1,000,000/$3,000,000 policy from another.
Take a look at the company actually standing behind the policy. Is it an admitted insurance carrier? Does it have an “A” rating from A.M. Best? How strong is its balance sheet? How much surplus does it have? How long has it been writing medical malpractice insurance?
It’s also worth knowing whether your policy is assessable. With an assessable insurance company or reciprocal arrangement, policyholders may have a potential obligation beyond the premium they initially paid if the company experiences adverse financial results. That’s fundamentally different from purchasing a non-assessable policy from a financially strong, highly rated insurance carrier.
None of this means the lowest-priced option is a bad choice. But when one quote is significantly less expensive than another, make sure you understand why.
You’re not just buying a piece of paper with a set of limits. You’re buying the financial ability and commitment of an insurance company to defend you and pay covered claims that may not be resolved for years.
3. Make Sure the Policy Reflects How You Practice Today
A lot can change in a year.
Maybe you’ve added an office location. Maybe you’re doing telemedicine in another state. Perhaps you’re now practicing at a surgery center, performing new procedures, working fewer hours, or doing some work outside your primary practice.
Take a few minutes at renewal to think about what’s different from a year ago. If something has changed, tell your agent or carrier and make sure it’s properly reflected in the policy.
It’s much easier to address a change in your practice before a claim occurs than to explain it afterward.
4. Make Sure All of Your Business Entities Are Covered
You may have an individual malpractice policy, but what about your professional corporation, LLC, or other entity?
Having an individual policy in your name doesn’t necessarily mean the business entity has coverage. Depending on how your practice is structured and your state, the entity may need to be specifically named or separately insured.
This becomes particularly important when physicians form a new LLC, open a separate practice, or create an entity for a new venture and assume their existing malpractice coverage automatically extends to it.
At renewal, take a look at the named insureds on the policy and make sure the entities that need coverage are actually there.
5. Look at What Your Employees and Other Providers Are Doing
Practices evolve, and sometimes the insurance doesn’t evolve with them.
Maybe you’ve hired a nurse practitioner or physician assistant. Perhaps an outside physician is seeing patients part-time at your practice. You may have added a nurse, medical assistant, or other clinical employee whose duties have changed over time.
Make sure your carrier knows who’s working in the practice and what they’re doing.
This is especially important when advanced practice providers are performing procedures, prescribing medications, working independently, or providing services that weren’t contemplated when the policy was originally written.
Don’t assume that because someone works for you, they’re automatically covered for everything they do.
6. Find Out How Defense Costs Are Handled
The cost of defending a malpractice claim can be substantial, even when the physician ultimately isn’t found liable.
That’s why it’s important to know whether defense expenses are paid in addition to your liability limits or reduce the amount available to pay a settlement or judgment.
For example, if you have a $1 million limit and defense costs are inside that limit, every dollar spent defending the claim reduces the amount that remains to resolve it.
This is exactly the kind of policy provision that’s easy to overlook when you’re comparing premiums—and one that directly affects the quality of your coverage.
7. Understand Your Tail Provisions
If you have claims-made coverage, don’t wait until you’re changing jobs or retiring to find out how your tail works.
Take a look at the policy’s extended reporting provisions. If you’re employed, review your employment agreement as well so you understand who is responsible for tail coverage if you leave.
How much would a tail cost if you need one? Is free tail available upon retirement, death, disability, or another qualifying event? What happens if you leave your current employer or move your coverage to another carrier?
Tail coverage is expensive, so it’s important to understand the tail provisions in your policy.
Take a Few Minutes Before You Renew
Medical malpractice insurance is something you hope you never have to use. If you do, however, the details of the policy—and the insurance company standing behind it—suddenly become very important.
Before renewing, take a few minutes to look beyond the premium. Think about what’s changed in your practice, make sure the people and entities that need to be covered are covered, and understand what you’re actually buying.
The bottom line is that malpractice insurance is about much more than price. In the event of a serious claim, your professional reputation and potentially your personal and professional assets may be at stake. The quality of the coverage you purchase—and the insurance company standing behind it—matters.
If you have questions about your current malpractice coverage or would like a second opinion, feel free to contact me.
Steve Sopyla, CPCU
Sopyla & Associates, LLC