Buying medical malpractice insurance can be a time-consuming, frustrating process. There are many different companies to choose from, policy types to understand and coverage nuances that can make it difficult to really know if you’re getting the best coverage at the best price. This is why most doctors prefer to work with an agent to help them compare options in the market. So, why not just have your current insurance broker – the guy who does your general liability, your business owner’s policy, your worker’s comp and your other commercial policies – do your malpractice? Isn’t it just easier to have 1 point of contact for all of your insurance needs?
Well today I’m going to tell you why this is actually a BAD idea. No offense to your commercial insurance agent, but there are a lot of reasons why you should NOT have him handle your medmal. Let me explain why…
2 Types of Agents
There are 2 different types of agents that you can work with for malpractice quotes – direct agents or independent agents. And we’ve touched on this topic in previous episodes, but let’s do a quick review together… starting with Direct Agents.
A direct agent works for a specific insurance company.
Their job is to sell insurance for the company they work for. They are captive agents and can only offer one malpractice solution from one company – the one that they work for. So, if you work with a direct agent, you’re only going to get 1 quote. A doctor or group would need to contact multiple different carriers on their own in order to get other coverage options to consider – which can be a time-consuming and tedious process.
On the other hand, Independent Agents do not work for any one company. They represent multiple companies, which gives them the ability to shop around and find the best fit for you. Independent agents aren’t beholden to any one company, which means that they are working for YOU, not for the carriers. Having access to multiple companies benefits you because it drives competition, resulting in lower costs.
Insurance policies aren’t like typical consumer products, where the same item can be sold for a different price through different means. Rates are filed with and regulated by the Department of Insurance in each state and carriers do not have different rates for the business they write direct vs. through an independent agent. So… a direct agent isn’t able to offer a lower price than an independent agent could. The company has to issue the same quote to either type of agent.
Furthermore, many malpractice insurance companies don’t even sell direct – they only work though Independent Agents, so even if you were to call on them, they would refer you out to one of their appointed independent agents to provide you with a quote.
Since the rate is the SAME whether you work directly with the company or through an independent agent, most doctors prefer to work with someone NOT affiliated with a carrier to get an objective, fair review of all available options.
Ok, so now you’ve decided that it’s best to use an independent agent to help you with your malpractice insurance, so you start doing your research and call a few different agencies to get the process started.
You talk to each of the agents about your coverage needs and ask them to get you quotes. Why not have multiple agents shop the market for you and have the best man win?
Unfortunately, it’s not that simple. There are several reasons why this approach not only doesn’t work, but it can actually HURT your chances of having the best quote options to consider at renewal.
We have another blog that talks about the pitfalls of working with multiple agents, but for today, just know that having multiple agents to go to market for you instantly complicates the purchasing process, and you lose the leverage that you may have had by working with just one person.
Ok, so now you know that 1) It’s best to use an independent agent, 2) You should only use 1 agent to quarterback your malpractice, so now let’s talk about 3) Why you need to have a specialized insurance agent for your malpractice.
Just the other day, I had a Plastic Surgeon who told me he had a current insurance broker (I think it was someone through his bank) that was helping him setup his commercial insurance for his brand-new start-up practice. He thought it would just be easier to have this agent do his medmal, as well, because… well, there would just be 1 point of contact for him, so it would make his life easier.
But after we spent some time talking, he quickly came to understand that there are some MAJOR issues with this approach. Let’s talk about them…
#1 Medical malpractice is arguably the most complex and intricate type of insurance that you’ll carry.
Not only are the insurance types very difficult for most people to understand (and then, in turn, help their clients understand), but each state is unique, and there are a LOT of different carriers in the marketplace. And while I can understand why that might seem simpler to just have any ol’ broker manage it for you, keep in mind that each type of insurance is highly nuanced and requires the right kind of market expertise and knowledge. Malpractice is the one insurance that we believe requires single-minded focus and attention, given the significant exposure to providers, the high cost, and the complexities of the market.
#2 High Risk to Doctors
Which leads me to the second major issue.. and that is the high risk to doctors. If your agent doesn’t know what they’re doing and you are left exposed, that is a MAJOR problem. If you get sued and there is no malpractice insurance in place, or a policy has lapsed, tail wasn’t purchased, or coverage wasn’t setup correctly in the first place, you are UNINSURED. Sure, you could sue your agent to try and recover from them if they made an error, but what a huge mess for you to have to deal with. Don’t run the risk of having an uneducated person or someone who “dabbles” in malpractice handle something this important.
#3 It’s Just Easy Commission
The third issue with having any ol’ agent handle your malpractice insurance is… let’s be honest, it’s easy commission for them. If they’re already handling all of your other lines of insurance, it’s an easy “add on” for them to also offer to help with your medmal. And as you likely know by now, malpractice premiums aren’t cheap – so it’s very enticing for an agent who wants to earn commission on an additional line of insurance – especially one that is so lucrative for them.
#4 Access to the Best Carriers
The fourth issue that you need to be aware of is that your commercial insurance broker likely won’t have access to the best carriers. Malpractice insurance companies are very selective with who they appoint to bring them business. There are strict standards and guidelines to ensure that only agents who are experienced and truly understand the market are able to sell on their behalf, and in usually only in specific geographic areas. For this reason, there are only a handful of agencies across the country who can access all of the best companies. Most insurance agents can only get to 1 or 2 carriers. And chances are, your commercial insurance broker isn’t appointed with ANY of them, so he will have to use a wholesaler to get him quotes. And most wholesalers are not going to these “top of the market” companies, they are using middle of the road, sometimes even non-standard carriers to quote the malpractice coverage.
But when you get this quote, you won’t know that it’s not a quality product. How could you know? You were trusting your expert agent to bring you the best options to ensure that you’d get the best coverage at the best price. It’s just a losing proposition.
#5 They Just Sell It and Forget It
And finally, the fifth issue that we see with non-specialized insurance agents handling your medmal is that they’re prone to putting it on autopilot because it is NOT the sole focus of their business – they just set it and forget it. So, how does that really serve you? The malpractice market is constantly changing, and your practice is likely to grow and evolve over time. If you don’t have an agent who is constantly looking at the marketplace to be able to educate you and advise you if and when changes may need to be made, then they are doing you a tremendous disservice.
Do your homework to find an agent that specializes in medical malpractice, has experience and knowledge in your state/region, and has access to the best carriers available. You should be able to trust your agent to represent you well, understand your coverage needs, provide ongoing support, and help you find the insurance carrier that is the best fit for you – while ensuring that you’re not overpaying!
And your malpractice insurance agent can easily work alongside your current commercial insurance broker to ensure that all of your needs are being met – and that you have the RIGHT experts in the RIGHT roles.