Doctors Q & A
Steps to Take Today to Minimize Malpractice Costs and Exposure
Q. I received an invoice from my malpractice insurance carrier. According to the invoice, my insurance premium has increased by almost $3,500. I am a good doctor and have never been sued. I can't understand how the insurance company can charge me this much money for coverage. Is there anything I can do to reduce my malpractice insurance costs?
A. While I don't know the specifics of your situation, the answer could well be "yes."
It is important to put your increase in perspective. According to data compiled by a recent congressional advisory commission, medical malpractice premiums have increased by an average of 11.6% per year since 1975. If these numbers hold true for 2005, that would place your anticipated increase this year at $2,320 (assuming a 2004 premium of $20,000). Moreover, increases vary widely from specialty-to-specialty; therefore, your increase may be, more-or-less, in line with the average increase.
The mere fact that the increase was "average" may not satisfy you. The total amount you are paying may still be unacceptable, so you may want to do the following:
- You should review your coverage. Each year, your insurance company sends you a "Declarations" page. Among other things, this document will indicate your limit of liability per claim and per year. Perhaps your liability limit is too high (or too low) for your specialty. Reducing your liability limit will reduce your premium expense, but it will also, of course, increase your potential liability.
- Consider the type of policy you maintain. Many doctors have "occurrence" policies. However, depending on your situation and risk tolerance, a "claims-made" policy may be more than adequate. (Click here for a discussion regarding claims-made vs. occurrence policies) Moving from an occurrence policy to a claim-made policy could reduce your annual premium by 60% or more (at least initially). However, this change is not appropriate for every doctor and the money you save initially may be offset (at least partially) by the cost of a "tail." You must spend time researching this issue and speaking with your insurance agent and/or attorney prior to making this change.
- Finally, you should make certain that your insurance tier reflects your 'clean' claim history. I was contacted by a client who had concerns about the significant increase in her medical malpractice premium. I contacted the insurance company and discovered that her rate did not reflect the fact that she has a 'clean' claim history. I advised her to authorize the insurance company to search her claim history. While she incurred a $35 administrative fee with respect to this search, the insurance company reduced her premium by more than $9,000 after it obtained the claim-history information.(With her permission, I have attached her initial invoice, authorization and notification of discount.)
Clearly, there are steps you can take to make certain that you are not overpaying for your medical malpractice coverage. However, it is important that you stay focused on your need to maintain adequate coverage. Finally, make certain that you discuss any possible changes with your insurance agent and/or attorney.
Stephen A. Snyder, Esq.
Vice President/General Counsel
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