By Matt Gracey
There is a hard market coming, so get ready now.
The present state of the malpractice-insurance market is still favorable to doctors purchasing coverage, but the signs of deteriorating conditions continue to build. The most concerning forecast is that Florida’s Supreme Court now seems very likely to overturn the 2003 significant tort reform of the caps on non-economic damages, which has led to an almost-50% drop in many doctors’ premiums since the caps’ enactment. The overturn is predicted to happen this coming summer of 2012, if not sooner. The retroactivity of the cap was recently overturned by the Florida Supreme Court, as were caps in several other states in the last few years. Given that we are at the natural end of our “soft” market conditions that have been so favorable to doctors, I predict that the cap overturn will be the event that insurers, but more importantly, reinsurers, use as the reason for increasing premiums rather rapidly. In the last year or two the soft-market-condition’s pricing has mostly leveled off as insurers realize that the cycle is changing in claims, but none of them want to be the first to increase prices given the stiff competition in the market now, with over 50 insurers of many sizes and experience offering doctors coverage in Florida. I term this the “Who will blink first?” phase of our market cycle.
As the soft market has continued on shaky legs in the last few quarters, we have actually seen a few new carriers enter the marketplace, which will probably just hasten the beginning of a harder market since the newer entrants are offering even lower pricing to compete with the established players. Speaking of established players, the recent purchase of First Professionals Insurance Company (FPIC) by California-based insurer The Doctors Company (TDC) makes TDC the insurer of the most doctors in the country, but eliminates one of Florida’s last highly rated insurers domiciled in Florida. Medical Protective is by far the very-highest-rated malpractice-insurer in Florida and the entire country, with an A++ rating from A.M. Best and a renewed commitment to Florida after being purchased by Warren Buffett’s Berkshire Hathaway a few years ago from GE, which had forced them to all but leave the state back in our last med-mal crisis. The leaders of Medical Protective are now publicly committing their strength and long experience to staying the course through our next crisis, which will be unfolding soon after the caps are overturned.
So, as we continue for a bit longer in the last gasps of the favorable “soft” market, my advice is to do the following:
1. Switch your coverage to a highly rated carrier (financial stability).
2. Switch your coverage to an insurer with great claims experience (your reputation is at stake).
3. Switch your coverage to an insurer with a real commitment to Florida doctors (avoid shopping for a new insurer in the middle of a difficult market).
4. Pay even more attention to good risk-management practices (hard markets are even harder on those with recent claims).
5. Find a way to get more negotiating power if you are not practicing in a large group. You can do this by joining a Risk Purchasing Group or creating one with your peers (large numbers = lower premiums).
6. Find an independent, knowledgeable, trustworthy, and specialized broker to guide you (a little help when out of your core competency is always good).
7. Work on a connection for channeling divine intervention as our next malpractice-insurance crisis begins to unfold (more help is even better).