Who Doesn’t Want More Cash?

As a cure for insomnia, the Florida Office of Insurance Regulation’s 2011 Annual Report of medical malpractice financial information is hard to beat. But it is chock full of great data. Issued October 1st, 2011, it not only contains insurance data for Florida but compares that data to other States. One sentence that will draw the interest of physicians and surgeons is on page 8: “For each of the ten states with most medical malpractice premium earned in 2010, Florida’s percent of earned premium paid on commissions (9.9%) was the highest in this group.” Yes, it’s true; for selling medical malpractice insurance to physicians and surgeons, the insurance agents and brokers in Florida receive the highest commission in the entire United States: 9.9% of the premium.

 

If you are a physician or surgeon with a significant claims history or an unusual clinical practice, then I recommend you retain an insurance broker to assist you through the maze of companies that will consider underwriting and providing expensive quotes for such difficult-to-place risks. But for the vast majority of physicians and surgeons, the direct and indirect costs of the broker distribution system should be factored into the formula used for buying insurance. If the services provided by the broker are worth paying more, then utilize the broker. If not, then go direct. There are many companies who provide “direct write” services in lines of auto insurance, life insurance, homeowners insurance, and medical malpractice insurance.

 

Even the federal health law now places broker fees and commissions within the category of “administrative expenses” (20% of premium) - rather than “medical care and quality improvement” (80% of premium). If administrative costs exceed 20% of premium, then insurers have to give rebates to consumers. This demand for administrative efficiency in delivering the insurance product to the consumer is now present in all lines of insurance.

 

The trend appears to be that consumers will increasingly go direct to the insurance company that has reduced premium based on reduced administrative expenses. In today’s world of readily accessible information, the consumer is now able to purchase the exact same insurance product from a “direct write” company that has financial strength and stability, a team of insurance experts eager to be of service, and aggressive litigation defense – all at a significantly reduced premium. Who doesn’t want more cash?