If it seems too good to be true, it probably is. We’re all familiar with that old adage but sometimes forget to apply it even when it’s crucial – as when buying something as important as medical malpractice insurance coverage. Many companies sell this kind of coverage – also commonly referred to as medical professional liability insurance (MPLI) – at deeply discounted rates. And while this may provide immediate relief to the insureds, the financials of these companies can be a cause of concern.
Here’s why you shouldn’t overlook the weak financials of an insurer no matter how enticing its rates:
- Insurers who focus only on attracting new business – without concerning themselves with the financial viability of their companies and longevity for their insureds – could easily “fast track” into insolvency, leaving policyholders scrambling for coverage and solutions.
- Medical malpractice insurance is a volatile line of business. As many healthcare professionals and their administrators may have witnessed within the series of recent health insurer Consumer Operated and Oriented Plan (Co-Op) failures, liquidation of a carrier in any line of business can lead to the detriment of many. The health insurance co-ops that were formed under the Affordable Care Act were built on the model of deeply discounted health insurance premiums as their appeal, but, as history proved, many were unsustainable, resulting in their ultimate liquidation. While this matter pertains to an entirely separate line of business, it illustrates the importance of financial condition and insolvency protection for all insurers, MPLI companies included.
- By nature, MPLI requires risks to be underwritten with a full understanding of the exposures and with the knowledge to price the coverage responsibly. Companies that choose to ignore underwriting principles in favor of increased market share can find themselves in dire financial straits. Moreover, as history has proven, some have become unable to continue operating, sliding into insolvency and ultimate liquidation by their State’s regulatory agency.
In contrast, MLMIC makes it its mission to provide affordable MPLI at the lowest possible cost that’s consistent with fiscal responsibility. This means operating on the basis of maintaining a sound financial foundation to ensure the fulfillment of our obligations to policyholders. Throughout our history, MLMIC has always adhered to responsible protocol.
However, that is not to say that the company does not afford premium relief when feasible. To date, MLMIC has issued dividends to its insureds totaling over $300 million. Given our exceptional financial condition, MLMIC has announced issuance of another dividend in the amount of 20% to its insureds as of May 1, 2016, who maintain continuous coverage through July 1, 2016. And even while doing so, our ongoing financial stability will ensure future claims paying ability. (You can review our latest financial statement information here.)
In our 40-plus years of operation as a mutual insurer owned solely by policyholders, MLMIC has remained committed to the MPLI marketplace, even during times of extreme adversity and volatility. This solid track record assures insureds they’ll have the security they’re entitled to. Having no outside “shareholders” to answer to, especially during uncertain times, ensures our unsurpassed staying power commensurate to our mission.
This post is based on the “Underwriting Update” by Robert Pedrazzi, Assistant Vice President, Underwriting. You can find it in its entirety in our Spring 2016 Dateline (pages 13-14).