Why Low-Cost Med Mal Insurance Isn’t Always the Best Choice
We often hear two common statements from healthcare providers: "they’re paying a lot less" and "I’m low risk." These perspectives highlight valid frustrations about medical malpractice insurance pricing, but the complexities behind those numbers are often misunderstood. While it's understandable that a healthcare provider needs to be conscious of cost, choosing the cheapest insurance option can come with serious trade-offs. Here’s a deeper look at why some providers might be paying less, and why securing low-cost med mal coverage can sometimes be pricier in the long run.
Not All Policies Are Created Equal – Comparing Med Mal Coverage
When comparing your premium and coverage features with that of a colleague, it’s important to remember that not all insurance policies offer the same level of protection. A low-cost policy might cut corners in ways you don't initially notice—until a claim arises. What looks like a good deal at first glance may leave you exposed when it matters most—so before opting for low-cost med mal coverage, be sure to fully understand what you’re purchasing.
Here are some common factors that can influence pricing and terms between providers:
1. Not all companies are created equal.
The insurance policy your colleague has may be with a sub-par company. Insurance carriers should be carefully analyzed. One important indicator is the financial strength of a company. You want to be comfortable knowing that the company will be around to pay future claims. A quick cheat sheet is to note if they’re insured with an RRG. Many RRGs (with the exception of a few that are backed by powerhouse standard insurance carriers) have historically been unstable and should be approached with caution. Another consideration is that some insurance companies offer more in terms of retention incentives and coverage features that outweigh higher premiums they may charge. For instance, it may be worth staying with a company with a higher premium if they offer free retirement tail, a benefit that can be worth six figures when you’re ready to step away from practicing medicine.
2. Poorer coverage terms usually means lower pricing.
There are many ways an insurance company can drive down premium but that often equates to less desirable terms. Some common strategies are to increase the deductible, reduce coverage limits, not offer coverage for prior acts (resulting in large gaps), taking away your right to fully consent to settling claims, making you pay for tail upon retirement, excluding coverage for certain procedures, not offering coverage for administrative defense, or making it so that you can only report a claim when there’s a demand for money. Med mal insurance policies are incredibly complex and there’s many ways in which a company can alter coverage to their benefit while reducing premium. Any change in coverage should be carefully considered and if it seems too good to be true, then it probably is. It's important to recognize that low-cost med mal coverage doesn’t always equate to the best value or the most reliable protection in the face of future uncertainty.
3. Look at maturity.
For claims-made policies, pricing typically increases for the first five years and then levels out once the policy is considered mature. When comparing pricing, know that a colleague’s policy with the same specialty and zip code may not have reached maturity yet, and so their pricing is lower at that point in time in relation to yours. However, their premium will continue to increase and may be comparable to yours once mature.
4. Take advantage of discounts.
Many carriers offer risk management, new-to-practice, group, specialty, board certification, part-time and/or claims-free discounts. These discounts can really make a difference. Claims-free discounts can be as high as 25% and new-to-practice 75%, for instance.
5. Beware of previous claims or medical board history.
Previous claims activity and medical board activity can significantly affect pricing. This includes claims that were paid out with no indemnity, medical board complaints, and any action taken against your license. Insurance companies view your history as an indicator of potential future risk and will price accordingly. Typically, insurance companies want to see at least five years “clean” with no substantial losses or medical board activity to remove surcharges and offer standard-market pricing.
One way to help soften this blow is to include detailed claims narratives with your submission. Being contrite, accepting responsibility, and outlining lessons learned typically has the strongest impact with Underwriters. Shirking responsibility and trying to explain your way out of medical board or claims activity is a red flag and may result in declinations or surcharges.
6. Be conscious of your online presence.
Most Underwriters will (and should) Google applicants. This can bring up out-of-date websites, for example, that outline higher risk procedures you stopped doing. If your application and websites don’t match, the Underwriter may assume that you’re still performing these procedures and may up pricing to match that level of risk. Underwriters will also look at how you respond to reviews and interact with patients online. Combative comments and erratic behavior will be noted.
Now that we’ve looked at terms and pricing, what is low risk med mal?
Low risk med mal doesn’t truly exist when comparing similar practices. That’s because insurance pricing is driven by historical data. Although you may consider your practice to be “low risk,” practices in similar geographic regions with comparable models and services offered may not have been. Those practices may have experienced claims activity, and their performance is now driving pricing. Trying to convince an Underwriter that you’ll be the exception is an uphill battle that is rarely (if ever) won. Underwriters strive to use logical and data-informed decision making. There are always outliers on either extreme, but your pricing will mainly be determined by what the insurance company has seen before.
This doesn’t mean that your pricing is permanently stuck at that rate, thereby meaning your actions don’t matter. See above for information on risk management and claims-free discounts that reflect your commitment to patient safety and practicing good medicine.
Our job is to understand and explain.
Reach out to us to make sure you’re maximizing discounts, getting the best coverage terms, and optimizing savings. We can provide an in-depth comparison between companies and policies so you can make an informed decision for you, your practice, and your wallet.