What does the cost of Thunderstorms in the MidWest have to do with my Medical Malpractice Insurance Premiums:

The Sever Thunderstorms that struck the United States from May 20 – May 27th will result in insured losses to residential, commercial and industrial properties and their contents, and to automobiles of between 4 Billion and 7 Billion,   Sever thunderstorms in Texas and Arkansas and Oklahoma brought high winds, hail and tornadoes; there were more than 150 confirmed tornadoes across the country, affecting more than 20 states.  Thousands of buildings were damaged, hundreds more were completely destroyed and more than a thousand people were injured.

 

This is important because…..because every insurance company, including medical malpractice insurance companies develops their premiums by factoring a few variables:  The amount of money that they have in reserve and surplus (TDC is very strong, hence it’s newly reissued A rating by A.M. Best,

They track the frequency of claims (the number of law suits filed in total against physician insureds); and they track the amount paid  per claim on average.

Generally, the amount per claim has been increasing 5 % per year for many years, even during this prolonged ‘soft’ market.  This has been a time marked by strong capital throughout the country, almost cutting in half the policies that have had to find their way to the surplus lines, substandard markets for coverage.  Most policies are issued by standard markets and preferred, discounted rates.

The frequency of claims has been steady and steadily on the decline for the past seven to eight years.

According to Crittenden (a widely read newsletter covering trends and developments within the industry, many companies are reporting the rise of frequency, the increase of claims per 100 physicians). 

 

All of these factors can put upward or downward pressure on claims.  Lately, with years of steady declines of reserves and upward pressure on claims severity, Carriers look poised to increase. 

 

The other important factor are these Storms!;  Insurance Companies all purchase Re Insurance, this means that another variable in the making of the rates is the amount of money that the insurance companies have to pay for their own insurance.  The losses of the reinsurance companies can impact the premium that medical malpractice insurers pay for reinsurance.  And, while many carriers purchase this reinsurance overseas, many of the companies based overseas have contracts to reinsure these very same companies that have insured so much of this property lost during the last week of May.

 

It is so important to ask simply: “what are the reserves of my medical malpractice insurance carrier”?  Remember, the threat of you being sued has a very long tail, the only ‘guarantee’ that you have against those unreported, but already incurred losses is the financial foresight, conservative pricing and reserving and strength of your medical malpractice insurance company.  At The Doctors’ Insurance Agency of Northern California, we place the majority of our medical malpractice policyholders with The Doctors’ Company, and for those with unique risk profiles, we work with a network of specialty insurance companies and programs to find you the best premium and the broadest coverage.

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