Benefits of a Long-Term Relationship With Your Medical Malpractice Insurance Carrier

We’ve written before about media reports on concerns over New York’s medical malpractice market. It’s one reason we can’t stress enough that insurer financials matter to policyholders. However, financials are only part of the picture when it comes to your relationship with your medical malpractice carrier. The length of the relationship matters, as well.

In the Fall 2016 edition of Dateline, Rob Pedrazzi, assistant vice president of underwriting, discusses the benefits of maintaining a long-term relationship with your insurer. He also warns that the actions some carriers take may put your coverage at risk. These behaviors include, for example, withdrawing from the marketplace or offering unsustainably low rates.

For this blog post, we’ve taken excerpts from Rob’s article to answer some questions you may have. You can read the article in its entirety here (see pages 9-10).

Why do carriers come and go from the MPLI marketplace?
Medical malpractice insurance (more formally known as medical professional liability insurance or MPLI) is a highly volatile line of business that is cyclical in nature. This characteristic commonly induces new players to enter the market in an effort to profit handsomely during the opportune times which occur in “soft market” cycles. Not surprisingly, many of these new and oftentimes inexperienced entrants to this specialized marketplace are not hesitant to withdraw from the market when upward cycle tics lead to a “hard market” and they witness a corresponding rise in indemnity payments and legal defense expense costs.

Other carriers – even established carriers – may leave the marketplace due to insolvency, sometimes caused by unwarranted “discount” pricing deployed for the sake of nothing more than a gain in market share. Those MPLI carriers who opt to “chase pricing” after their competitors are more prone to fail, to the detriment of their insureds.

How are policyholders affected when carriers leave the marketplace?
When a carrier withdraws from this line of business or succumbs to insolvency, policyholders must rapidly search for replacement coverage under a certain deadline: a stressful situation that may lead to uncertainty regarding the handling of their known and unknown future claims.

Is this happening in New York?
Yes. Earlier this year, various media sources had reported on the questionable finances of an admitted (licensed) NYS carrier, as well as the effect that a large influx of Risk Retention Groups (RRG) was having on the entire admitted NY MPLI marketplace. The articles raised awareness of their overall impact, highlighting the disconcerting financials of the referenced admitted carrier, as well as pointing out the concerning fact that RRG’s may exit the market whenever they desire as they are solely governed by the state in which they are licensed.

What’s wrong with “discount pricing”?
Despite the unsustainability of their business models, some carriers lure new customers with the promise of deeply discounted premiums. There’s a downside not only for the marketplace but also for providers: frequently changing MPLI insurers for what is often nothing more than short-term premium relief could eventually result in loss of insurance protection should their insurer become insolvent and not eligible to participate in the NYS Property/Casualty Insurance Security Fund. One other point worth considering in this matter is the prospective handling of either existing or future lawsuits after an insured is no longer covered by their prior carrier (see details below).

What are the benefits of a long-term relationship?
Practitioners who opt to insure and maintain a relationship with a financially strong and stable insurer reap many benefits by “partnering” with them. This business strategy affords a more stable and secure financial environment, ensuring the company’s ability to meet obligations to its insureds through hard markets without jeopardizing solvency. MPLI companies that adhere to this balanced approach, which is the proven formula to properly address the cyclical nature of this line of business, have stood the test of time.

MPLI lawsuits, from the inception of a case to its closure, generally take years to resolve and require ongoing communications between the policyholder and their insurer. Those practitioners who maintain a consistent relationship with a financially sound carrier such as MLMIC – with over 40 years of operation – can rest assured, knowing that their claim is being handled with the utmost level of service and integrity that they had originally signed-up for. Unlike MLMIC, a practitioner’s previous carrier, with whom they are no longer insured, may not have the incentive or resources to vigorously defend ongoing cases. In the absence of a current relationship, insurers may be more inclined to opt for the most cost saving approach when handling these claims.

Posted in Hospitals, Physicians

Tagged , , , , ,

9 thoughts on “Benefits of a Long-Term Relationship With Your Medical Malpractice Insurance Carrier

    1. Thank you for this question. It’s an important one, and we’re happy to have the chance to reiterate that, despite entering into a definitive agreement with Berkshire Hathaway to join its family of companies, MLMIC’s relationship with and commitment to its policyholders will not change. Although the structure of the company will transition from a mutual company to a stock company (which means policyholders will no longer have an ownership interest in MLMIC and many will receive a significant payout at close), there will be no change in our operations or our philosophy of providing a strong defense against claims brought against our policyholders. In fact, the affiliation with Berkshire Hathaway strengthens our ability to serve policyholders, providing an even higher level of financial security and an expansion of offerings.

      You can find more information about the agreement here and review these frequently asked questions. And of course, we’re happy to chat at any time! If you have additional questions, please call 1-888-998-7871.

      1. Kenneth Pidkover MD says:

        I am wondering about this. Many of us have had our premiums reduced by, well, to be honest, good behavior in the form of Risk Management Credits and Claims Free Discounts. Will we be dinned for this by having our payout lowered because of these discounts while others who have not taken risk reduction courses or who have had claims paid on their behalf actually be advantaged? Perhaps I should call this question in to MLMIC but I think it’s an issue that affects a lot of physicians and they should be aware of this issue as well.

        1. Kenneth Pickover MD says:

          Err..sorry, didnt mean dinning, meant dunning and that probably was the wrong word as well, meant to say will be disadvantaged in this payout due to these discounts…

          1. NY Insurance Law (not MLMIC) determines the how the payout is calculated. As required under the New York Insurance Law, proportionate shares will be determined by dividing the premium paid on each eligible policy from July 14, 2013, through July 14, 2016, by the total premium MLMIC received for all policyholders during that period. If you wish to discuss further call 1-888-998-7871 to speak with a MLMIC representative.

  1. I was insured with MLMIC from 2000 to 2016 and recently retired. Will I receive a payout even though I’m not currently insured with MLMIC?

    1. Yes — If you were an owner of an eligible policy from July 14, 2013, through July 14, 2016, you will receive a payout. Additional information is available in these FAQs. And, of course, if you have questions about your specific circumstances, we’re always happy to help. You can call 1-888-998-7871.

Leave a Reply

Your email address will not be published. Required fields are marked *