Building Your Medical Liability Risk Management Program<br><i><b><font size="-1">The Underwriter Relationship<br>Part Two of a Two-Part Article</font></b></i>

Having a brief, in-person meeting with the underwriter is admittedly the exception when buying insurance. Medical professionals may at first feel they are too busy to meet underwriters, but it pays to carve out time on the schedule for this. A conference call or email does not have the same impact. To jump-start the process, the prospective policyholder will have to complete an application for coverage. Once this is done, have the insurance broker schedule the meeting by asking for a short chunk of time to meet face-to-face in the underwriter's office.

For medical professionals, time spent meeting underwriters may seem like a needless distraction, but it can pay off in broader insurance coverage at a more favorable price!

2. Know Your Aims

The goal for health care professionals and entities is to emerge from the herd, differentiating themselves in a positive way, as a good risk that any underwriter and insurance company would want to insure.

3. Prepare an 'Elevator Speech'

By that, we mean a short verbal commentary, meant to inform. It should be two to three minutes long. Explain why the medical practice represents a good risk. Highlight key features, particularly insofar as patient safety is concerned. Underwriters often have limited availability and time, so hit the high points and prepare to amplify. Expect questions — and plan to offer context — about prior claims, lawsuits, settlements or trials.

When meeting an underwriter, the physician or hospital risk manager is an ambassador for the practice or facility. A well-prepared applicant tells the underwriter that the practice “has its act together” regarding patient safety.

4. Make a Positive Impression

Appearing unprepared casts a negative pall. The aim: Leave the exchange with the underwriter thinking, “That [doctor/medical practice/hospital] has systems in place and would be a good risk!” This impression should manifest itself in the form of a favorable insurance quote, in terms of price and coverage features.

Designing Financial Protection

There are several other factors to weigh in designing a risk management program. Here are a few.

1. Look Beyond Price

When buying medical liability coverage, avoid the temptation to view a “cheap quote” as the cornerstone yardstick. In fact, be wary of premium quotes that seem unusually low. In insurance — as in other realms — inexpensive goods and services are often cheaper for a reason. Low premiums may signal that the coverage is limited, that the insurer tussles with policyholders over coverage, has shaky finances, hires cut-rate defense lawyers or cannot satisfy claim-paying obligations.

Of course one must consider cost, but avoid purely price-driven buying decisions. Assess as well an insurance company's financial stability, status, longevity and reputation. If a cut-rate insurer throws a doctor's professional interests under the proverbial bus by paying a frivolous claim, or if the insurer becomes insolvent or denies coverage on specious grounds, the cost-savings from a low premium exposes an illusory bargain.

2. Consider 'Admitted' Versus 'Non-Admitted' Insurers

Some insurers are admitted to conduct business in their states. Others are non-admitted. “Admitted” means that the state granted the insurer permission to write coverage. State insurance departments typically regulate admitted companies more tightly than non-admitted companies. Further, in many states, only admitted carriers participate in a state fund (often called a “guaranty fund”) that compensates policyholders if an insurer becomes insolvent. This is not to say that admitted carriers are, by definition, superior; only that buyers should inquire and factor the answer into a rational purchasing process.

3. Assess the Insurer's Financial Strength

Doctors, practice groups and health care entities should ponder the insurer's financial strength, size and stability. In assessing this, compare ratings that companies receive from various rating bureaus. Perhaps the best known is A.M. Best (“Best”), which publishes periodic insurer rating guides. An insurance agent or broker can access this information, helping compare one insurer to another based on financial metrics. Best's overall company ratings consider insurer operations, underwriting and finances, assigning each company an overall grade.

4. Assess the Insurer's Tenure in the Medical Malpractice Space

This refers to how long the insurer has written medical malpractice coverage in the state, and the odds that it will keep writing when claims crest or the insurance market gyrates. Such oscillations are common in the medical malpractice realm. Medical entities deserve carriers who will partner with them in good times and bad.

Some insurers dabble in writing medical malpractice coverage; others specialize in it. Grabbing the cheapest premium quotation is no bargain if the insurer later cancels or non-renews coverage because of:

• One large claim or a run of bad luck;
• Loss of admitting privileges at a hospital;
• Insurance company management that no longer considers medical malpractice risks attractive;
• A TV “exposé” on some therapy, procedure, medication or device prompts an insurer to over-react.

Medical professionals and facilities need insurers with proven track records in writing medical malpractice coverage. Therefore, ask carriers:

• How long have you been writing medical malpractice coverage?
• Can you provide names and phone numbers of existing clients in the medical malpractice field?
• How can I be sure that your company will remain a stable market for my insurance needs and won't abandon me?
• What long-term pricing trends can I expect?” (Caveat: Some insurers give a low-ball price as a loss-leader to lure new business. Later, they hike premiums when you have claims. If a deal looks too good to be true, there is probably a reason!)

Specific or vague answers to any of these questions are litmus tests for whether a prospective insurer is a good match with your needs.

5. Consider Medical Society Insurers

Depending on the state, medical malpractice coverage may be available through medical society captives, which are doctor-owned and managed. These insurers often provide stable sources of coverage at reasonable prices. They may be organized as mutuals or reciprocal insurers. In addition to providing financial protection and premium stability, Medical Society insurers often work closely with members on risk management programs and initiatives.

6. Probe for the Insurer's Claim Defense Philosophy

For example, ask about how the insurance company selects defense counsel. Seek a carrier that hires attorneys steeped in medico-legal issues. Investigate the insurer's reputation. Ask other physicians and health care professionals about their experiences with that insurer. How knowledgeable and experienced is the claim staff? Does the insurer have on-staff medical consultants to help evaluate claims? What is the average caseload per adjuster? How many supervisors are there per adjuster? This gives a sense of whether the insurer's claim department is adequately staffed.

Importantly, what is the insurer's defense philosophy? Some insurers pursue “nuisance value” settlements to close their books, minimize file inventory and trim legal fees. Other medical malpractice carriers tenaciously defend policyholders and are willing to head to trial if they feel the medicine can support a physician. Still other carriers are somewhere in between these two extremes on the philosophy continuum. The point is not that one approach is right or wrong, but that, when dealing with professional reputations, insurance buyers should discuss the insurer's claim philosophy, especially if they want to avoid settlements on their record or having to report to the National Practitioner Data Base.

Evaluating Risk Management Services

When shopping for medical malpractice coverage, ask about risk management services. Many insurers compete on price. Others compete on the breadth of their insurance coverage. Others tout value-added risk management services.

Following are risk management services to seek when shopping for medical professional coverage or comparing one premium quote to another:

• Risk management newsletters;
• Site visits by trained health care risk consultants;
• “Members-only” risk management seminars and conferences;
• In-service training for medical staff on practice-specific risk management strategies;
• Risk management webinars and podcasts;
• Website resources, including medical risk management checklists; and
• Access to attorneys for advice on “touchy” situations, with a toll-free number.

The point is, risk management includes buying insurance as a loss financing tool, but goes beyond merely having insurance in place. A sound risk management program includes twin pillars of insurance and loss prevention as a one-two punch against financial uncertainty. Investing in an insurer that offers not only policy coverage but risk management services yields a sound return on investment for the premium dollar.

Conclusion

The liability landscape for physicians, hospitals and medical practices is fraught with land-mines. Medicine is part art and part science, with guaranteed positive outcomes illusory. Despite the best laid plans, credentials and details, adverse patient outcomes occur. Lawsuits often ensue, some of them frivolous, some of them because of genuine medical errors.

Fortunately, rational strategies can provide medical professionals with ways to minimize uncertainty. To the extent medical malpractice liability is the ailment, a sound risk management program and strategies reflected here can be part of the prescriptive cure.

***** Kevin M. Quinley, CPCU, ARM, a member of this newsletter's Board of Editors, is CEO of Quinley Risk Associates LLC, a risk management consulting firm. His book, Bulletproofing Your Medical Practice, is available from Quinley Risk Associates. He can be reached at [email protected].