South Florida Hospital News
Monday March 1, 2021

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June 2005 - Volume 1 - Issue 11

Doctor-Owned Reciprocal May Be Cure for Malpractice Insurance Ails

Early in his career, Steve Salman was the risk manager for Health and Hospital Corporation in Indianapolis. During his tenure, he encountered a problem he’s been working on ever since: skyrocketing medical malpractice premiums.

"One county hospital had never paid more than $10,000 on any claim, and they never had more than two claims a year," Salman recalls. Yet insurance premiums had risen over 300% —something like $168,000 to $846,000 for a million dollars in coverage. A riled board of directors turned to their insurance expert — Salman — and demanded that something be done. His solution was to set up the area’s first self-insurance program.

Thirty years later, Salman is recognized as a national expert on medical malpractice insurance, healthcare risk management and law. He is also CEO and founder of the doctor-owned and governed medical malpractice insurance reciprocal, Healthcare Underwriters Group of Florida (HUFL), and an insurance management firm, Global Insurance Management Company, LLC.

HUFL, one of several organizations managed by Global Insurance under a long-term agreement, started up in Florida in 2003 and was officially licensed by the Florida Office of Insurance Regulation on March 23, 2004.

"We’re domiciled here. We’re based here. We’re owned by doctors in the state of Florida. And we only do one line of business: medical malpractice insurance, and only for doctors," Salman explains. "We believe HUFL was the first reciprocal to apply for a license here in Florida in quite a while."

According to Salman, being a reciprocal means the group must be managed by the attorney-in-fact — a management company. The only asset a reciprocal has is its bank account or cash. It owns nothing else and has no employees. This set-up yields numerous advantages.

"Unlike publicly traded insurance companies, ours is not for profit," Salman points out. "Its primary goal is to serve its owners — who are also its insureds. Therefore it’s more singularly focused on being a strong insurance company that provides strong defense of the doctors, as opposed to public companies that must answer to two masters, their shareholders and their customers."

Salman thus expects HUFL to defend more cases in Florida than other malpractice insurance companies. Similarly, because it is solely focused on Florida, he says HUFL has a deeper understanding of the claims environment than most public companies that write business in Florida but are based elsewhere. Such companies, Salman adds, may even be afraid to try cases, particularly in South Florida. "Florida is like several different states with differing cultures in the panhandle than in the central and southern parts of the state," he explains. "You have to understand these differences and how to manage claims differently in each of these environments. It really takes someone who is based here, lives here and understands the environment to manage cases."

And make no mistake — HUFL intends to defend its doctors vigorously. "Our goal is not to settle any nuisance claims — to defend every doctor that has a nuisance claim," Salman says. "We want to let plaintiffs know we’re not a soft touch. If they don’t have a strong case, then they’ll have to go to the mat with us each time. And typically they’re going to lose 80 to 90 percent of the time." Salman notes that players on the HUFL team include many industry veterans who previously managed Florida’s largest physician-owned medical malpractice insurance company. "We went to trial on more cases than all the other companies combined year in and year out, and we’d win 85 to 87 percent of the cases every year," he says proudly.

To maintain that kind of record at HUFL, all claims are reviewed by a committee of physicians who are insureds and owners of the company as well. Medical analysis of cases helps assure that the right decision is made early on in the claim. HUFL also boasts a claims staff that has 25 to 30 years each of experience managing medical malpractice cases (much of these in Florida), and a carefully selected team of trial lawyers known for their willingness to try cases. "The plaintiff’s bar knows that when our attorneys say they’re not going to settle the cases, they mean it," Salman points out. "In short, we do everything we can to strengthen the defense that we provide for our doctors. After all, that’s the number one thing they’re buying — someone to defend and indemnify them in the event they have a claim. That’s the part we sell and that’s what we think we have, an obligation to provide for our insureds."

Likewise, Salman emphasizes, the HULF underwriting process is stringent, yet even-handed. Every doctor must complete a lengthy application, which is reviewed by an underwriting department and/or underwriting committee comprised of physicians. Together they decide if the doctor will be insured and what the premium will be. Some commercial carriers use what Salman refers to as clipboard underwriting, which often means not insuring a doctor because of the number of claims or the amount of money paid out in claims. "We go back to the old standards of underwriting," Salman says. "We look at each application carefully — if a doctor has had some claims and some dollars paid, that doesn’t necessarily mean the physician is a bad risk. The doctor may have been with an insurer who was settling claims for economic reasons."

Salman adds that through the underwriting process and beyond, the role that peer physicians play in decision-making sets HUFL apart. "For example, the underwriting committee, because of their medical background, can tell if a doctor has been properly trained for the types of procedures they want to perform," he says. "Most commercial carriers would not be able to provide this type of oversight."

At the same time, since the company does not have a public company’s often narrow focus on market share, they can be very selective, and avoid what Salman describes as a common pitfall for malpractice insurance companies. "We don’t chase bad business at the wrong price," he says. "Most of our business comes from physician referrals who are already members."

Salman points out that malpractice insurance is, by its nature, a tricky business financially — underwriters selling a unit of insurance won’t know the real cost of that unit of insurance for three to six years. Salman believes this is one more reason to choose HUFL over a commercial company. "If malpractice rates are higher than they need to be, and that can be the case, then there’s no physician in this state that should be insured by any company that is not their own. In three to six years, if rates were determined to be too high for the year 2005, commercial carriers will send fat checks off to their investors. With HUFL, the only place an extra dime can go to is the physicians that own the company," he says.

The physician-owned insurance model has thrived before — during the 1970s, for instance, spurred on by a similar medical malpractice insurance environment. Unfortunately, Salman says, the companies drifted from their original purpose, going into multiple states with multiple lines of coverage, then transforming from reciprocals or mutuals into public companies. "They lost track of what made them strong and a good model, and eventually many went out of business," he concludes.

According to Salman, HUFL is committed to remaining a single state company. He points to a study conducted by Conning & Company, a research institute for the insurance industry, which examined the reasons for success and failure in physician malpractice insurance companies over 20 to 30 years. Their research suggests three common factors in the long-term survivors: staying focused in a single state, offering only one line of insurance, and ownership by the doctors insured. "That’s the model we have," Salman stresses. "HUFL is the only insurance company in Florida that allows full ownership and full governance by physicians. Every doctor has a vote in the company. Other companies talk about it, but only ours is fully owned and governed by the doctors."

So far, that model is resonating with Florida physicians. In a time when many doctors are "going bare," or carrying no insurance, HUFL is steadily adding new participants and is very close to its first-year goal of having 500 doctors on board. Long-term, Salman envisions having about a 6% market share in Florida, or 1,500 to 2,000 doctors, but he notes that their business model is very scalable. "If a major insurer would leave Florida — as they have in the past — and an extra 300 doctors showed up at HUFL, we could insure them. But we don’t have to — and that’s the important thing," he says. "One way companies get into trouble is by creating an overhead base that requires continual growth — at some point you just run out of good doctors to insure and you have to take bad doctors. But our model is very lean and mean from an operational expense standpoint. We don’t have to take the next doctor that comes across the transom unless they’re a good doctor."

Many hospitals like the HUFL model as well. With so many doctors "going bare" right now, the hospital may be the only entity in a case covered by insurance. But beyond simply sharing a potential liability, hospitals find that HUFL is committed to an effective and fair joint defense program. "Typically, the plaintiff’s bar wants to divide and conquer. If the hospital argues with the doctors and the doctors argue with the surgeons, and so on, they can sit back with their arms crossed while the defense side makes their case and the money builds up," Salman explains. HUFL also stays open to settling a case collectively — then, once the releases are signed, the various parties can privately arbitrate among themselves as to who has what percentage of liability. "It prevents turning a $300,000 case into a $2 million one," Salman says. He adds that, having worked on the hospital side, he has an appreciation for what they go through.

Indeed, Salman and staff appreciate what the entire medical community is going through, and they believe that bringing doctors together is the most dependable solution to the problems of medical malpractice insurance.

At A Glance

Steve Salman, President and CEO of Global Insurance Management Company, LLC. and CEO of Healthcare Underwriters Group of Florida.

First Job: Paperboy, when I was eleven years old delivering the afternoon paper.

Particular skills needed at the job right now: Understanding of the medical community and how the health care delivery system works in this country, understanding physicians and understanding the technicalities of insurance are really important. The real skill is being able to attract the right people to your staffing positions and picking top vendors.

Proudest Accomplishment: My two children.

Most Valuable Lesson: More people rust out than wear out. Don’t complain about the way things are, do something about it.

Person Most Admired: My father.

Favorite Books: While on a recent vacation I read novels, by James Patterson and John Gresham.

Biggest challenge confronting healthcare: Reimbursement to doctors.

Predictions for Healthcare: Plenty of changes, it’s a dynamic industry.

Philosophy of Success: Make things happen. I don’t believe in luck. The harder I work the luckier I become. Two things in life there’s no replacement for are hard work and education.

For more information, visit or call (954) 923-1900.
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