The calculation of premiums for medical malpractice insurance has many facets that contribute to the bottom line cost to the physician. But did you realize that medical malpractice insurance cases, even when they are not taken to settlement can be costly to an insurer? One of the many variables of premium calculation is the doctors medical malpractice insurance claim history. Often a physician will apply for coverage and not even realize that the cost of Legal Expenses to defend a case, can play into their medical liability insurance claims history. While I don’t want to scare you with these facts, I would rather educate and give you some insight on how these dollars are paid out and what affect those payouts, albeit not for indemnity of loss, may impact the bottom line.
More than half of the physicians will see some sort of medical liability insurance suit by the time they are 55, and only a small number of those settle. Are there some ramifications to the insurer even when that case dismisses or is dropped? With some carriers, yes. When a loss run shows legal expenses, these costs can be factored into the “dismissed” or non settled cases when a carrier reviews your medical malpractice insurance loss history for premium calculation. Many physicians never see this side of the coin until they request a loss history from the insurance company and can be blind sided by the impact of these figures on their medical liability insurance premiums in the future.
Medical malpractice insurance carriers look at a physicians claim frequency in addition to their claim severity. Physician malpractice insurance underwriters use claim frequency to track how often a physician received a medical liability claim. As mentioned above there is significant cost to the malpractice insurance carrier to have a claim resolved, even when that case is dismissed. Underwriters are also interested in looking at claim severity. This is how large the settlements are when the doctor has a claim against him and loses. Physicians with high claim frequency or high severity are often warning signs to medical malpractice carriers.
A physician’s malpractice insurance claim frequency and severity is also somewhat determined by how litigious the state or county is that he/she is practicing in. Premiums are adjusted based on the physician’s specialty and the county that they practice in. Physicians in higher risk specialties such as Ob/Gyn, vascular surgeons, orthopedic surgeons, plastic surgeons, anesthesiologists, general surgeons etc, pay a higher premium to compensate for the higher claim frequency and severity that these specialties have. States like New York, Illinois, Florida and Pennsylvania have higher premiums to compensate for the higher risk as well. Medical liability insurance underwriters understand that doctors practicing in these specialties or states are expected to have claim histories that reflect higher frequency and high severity.
This brings another question to mind: Should you request a loss run every so often on your malpractice claims history? You would check your credit score, why not your loss history if you have any incidents or dismissed cases? While many of the medical malpractice insurance carriers will only look at claim history going back 5 to 10 years, you should know what information is being disseminated to carriers you may apply to down the road. This information may not show up on your National Practitioner Data Bank Report, so you want to be certain you order a loss run or claim history from your carrier. Also, be sure to ask your broker to help you with the process… it’s easily done and can help you understand what the carriers see when you apply for medical malpractice insurance coverage.