Do you need an insurance check-up?

Five tips from an insider that can save you money

Most practices think they are spending too much on medical malpractice insurance. But do you actually know that you are? A lot of practices are, indeed, overcharged, says David Martin, an agent with The Premium Group Inc., a Cleveland-based insurance agency.

"The incentive in the industry is that an agent gets a percentage of the sale. The higher the price of the sale, the more money he or she makes," explains Martin. "Many doctors are thus paying more than they should. There just isn’t an incentive for cheap deals."

But there are ways you can tell if you are paying too much, he says. Here are five:

1. Know your options. There are several ways to do this, some more labor intensive than others, says Martin. One is to pit several agents against each other, asking for their best rates. Another is to take the time to go to your state department of insurance. "The companies have to file their rates with these departments," Martin says. "If you have the time and aptitude, you can get data on each specialty and each insurance companies."

You can also try to find an agent that will do this leg work for you — and let you know the results of his or her search.

2. Know the rating philosophy of the companies involved. Martin says that companies may have different rates in different counties depending on the litigation rates of those areas. For instance, one company in Ohio may have the five counties surrounding Cleveland rated higher because of that city’s higher litigation rate. Another company may have as many as 12 surrounding counties at a higher rate.

Again, this takes research, or an agent who will do the research for you, says Martin.

3. Look for other policy features besides price. Price isn’t everything, Martin warns. "You might be interested in consent to settle rights," he says. In light of some states’ reporting malpractice settlements to the general public — Massachusetts and Florida, for example — this is even more important. "If they settle without your permission, and that settlement is reported as a negative, then you may want a different company."

4.Be aware of the company’s financial strength. In the last five years in Ohio, says Martin, five companies have come and gone from the market. "Most have done so because of poor financial situations," he says. "When a suit comes and a payout is made in five years, you want to be sure that the company will be there to pay it."

Don’t count on state funds to cover the cost, either, he says. Although most states have pools of money set up for such eventualities, they usually won’t cover the suits. "That leaves you holding the bag."

Martin recommends that you check with at least three rating companies for each insurer you are considering. The five he uses most often are Moody’s, Weiss Research, Standard & Poors, AM Best, and Duff & Phelps. The latter two don’t always have information on the smaller insurers and are best used to check larger companies.

The reason for the multiple checks, Martin says, is that some of the information can be misleading. For example, of the five largest insurance failures in the nation’s history, three of them had A ratings from one of the rating companies, one had an A-, and one had an A+ just prior to failing.

5. Ask your colleagues for insurance recommendations. If you don’t have the time and inclination to do the research yourself, you need to go to an agent, says Martin. But be sure you ask your colleagues for their recommendations. "There are good agents and bad agents," he says. "You have to work to find a good one."