“A” is for Antediluvian

Timothy R. Bone, President, MedMal Direct Insurance Company // May 14, 2011

[an-tee-di-loo-vee-uh n]
1. very old, old-fashioned, or out of date; antiquated; primitive: antediluvian ideas.

It is in the best interest of the physician to purchase medical malpractice insurance directly from the company selling that insurance; thereby avoiding unnecessary costs from an antediluvian distribution system.

Over the last 100 years, medical malpractice insurance companies have utilized independent agents and brokers to bring the insurance buyer to them by paying them up to 12% of the written premium as their commission. This unnecessarily increases the cost of the insurance product.

In addition to the 12% agent/broker commission, this archaic system further increases the cost to the physician by requiring up to another 10% of the total premium to be used to (a) hire people inside the insurance company to manage these independent agents and brokers and (b) provide financial rewards to these independent agents and brokers – ranging from cash bonuses to trips in exotic locations – so they will bring the physician client to THEIR insurance company rather than the competing insurance company. The system works best for the independent agents and brokers. The system does not work best for the physicians buying the insurance.

A more subtle point is that this system inadvertently creates a “moral hazard” for the agent/broker in that it is in the best interest of the agent/broker to sell as much insurance as possible, as they are paid a percentage of the total premium sold. But selling too much insurance to a physician will increase the attractiveness of the financial “target” that physician makes to a plaintiff attorney; and will then increase the frequency of the litigation AND the length of time that litigation takes for final resolution. This is a significant adverse effect experienced by the physician being sued as the tension, stress and time away from the practice go on for years as the plaintiff attorney pursues lengthy legal discovery proceedings to convince the insurance carrier to pay the full policy limits available, and the insurance company pursues the same lengthy legal discovery proceedings to convince the plaintiff’s attorney that the case is worth much less than the policy limits. Caught in the middle is the physician, who provided the best clinical care, yet is now caught in a system that does not move forward based on clinical objectivity but rather on the amount of money available to pursue.

This antediluvian system encourages the physician to (a) purchase too much insurance and (b) pay too much premium for that insurance. Yes, it is that simple. And, yes, there is a better way.

Medical malpractice lawsuits are an unfortunate cost of practicing medicine in the United States, requiring physicians to protect themselves from these lawsuits. Medical malpractice insurance coverage should be the base of this protective pyramid.

It is absolutely essential to have an aggressive attorney defend you; and all medical malpractice insurance policies include this cost of defense, in addition to the policy limit. Other avenues exist to save money on buying this type of insurance: (1) consider using higher deductibles, especially “policy limit only” deductibles – and thus only pay out-of-pocket if there is a settlement or verdict, (2) buy only from a company that is licensed and regulated by the Florida Office of Insurance Regulation, and (3) consider an insurance company that provides medical malpractice insurance coverage to the physician in a cost-effective way. Don’t be antediluvian; be direct!