South Florida Hospital News
Sunday May 26, 2019
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July 2011 - Volume 8 - Issue 1

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Malpractice Insurance Expert Advice

Q. Why is a rating of a malpractice insurance company so important? Are some rating agencies considered better than others?
 
A. An insurer with a high rating from A.M. Best could be considered the equivalent of a doctor being board certified, experienced, and considered competent in their chosen specialty by an outside peer review group. For some years now many doctors and their administrators seem to have forgotten the vital importance of their malpractice insurer having a solid financial rating from one of the major rating agencies, including A.M. Best and Fitch. Malpractice insurance is one of the most important purchasing decisions made each year by doctors. With such a potentially long time between deciding on an insurer and a potential multimillion dollar payout to satisfy a judgment, the stakes are high for making an astute decision. Insurance is a strange beast in that policyholders are essentially purchasing a promise from an insurer to pay an undetermined amount of money at an undetermined future date. With Florida’s bad faith laws, the payout could be many times the policy limits purchased and in a multi-defendant, complex lawsuit a judgment could be awarded up to ten plus years after a claim is first filed. The significance of that is that an insurer that looks marginally healthy today when a doctor is making a decision on his or her insurer could well be gone in those ensuing years, and in Florida such seems to happen with rather regular frequency. Unrated, financially fragile insurers also tend to settle more lawsuits, thus providing compromised claims defense. That is why doctors must get back to fundamentals of financial decision making by determining which prospective insurers hold a high rating from A.M. Best or Fitch. Some doctors with serious claims histories, however, might not have the luxury of being insured with a highly rated company, but most still do, particularly in our present “soft” market conditions when underwriting is much looser than in “hard” market conditions. In previous times of Florida’s malpractice insurance widely variable cycles, we have seen doctors have few choices, and rating at times had to be overlooked. But in this market’s conditions, those doctors with good claims histories and normal practice profiles have the ability to find fair pricing from highly rated insurers without taking the risk of purchasing coverage from unrated insurers.
 
Other rating agencies have been formed in recent years to help newly formed insurers or those who choose for strategic reasons not to ask the more highly regarded agencies for a rating, so be diligent to ask about and understand the rating agencies’ differences. Some unrated insurers also tell their prospects that their reinsurers are all highly rated, but reinsurers are only a backup to the insurers’ risk and can decide not to continue their participation with any insurer in any given future year at their own reinsurance policy’s renewal. 
 
Matt Gracey is a medical malpractice insurance specialist agent with the firm of Danna-Gracey in downtown Delray Beach. To contact him call (561) 276-3553 or (800) 966-2120, or e-mail matt@dannagracey.com.  
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