Frequently Asked Questions

Q: What is more important – being an admitted insurance carrier or being rated by A.M. Best?

We feel that it is more important for an insurance carrier to be admitted in the State that they are writing insurance in. When an insurance company is an admitted carrier, there is added protection afforded by the State that assists the policyholder in case something happens to their insurance carrier.

Q: When is the best time to change insurance companies?

A physician’s insurability and an insurance company’s capacity are perishable. If a superior product and value are available right now, it makes good sense to act upon it right now. Insurance carriers must refund any unearned premium (sometimes with a slight charge). Waiting may cost you the opportunity if it is not offered later. We feel that you should never wait to change insurance companies.

Q: How is my premium determined?

Medical liability insurance premiums are determined based on specialty, territory (geographic location), policy limits, and claims made year (maturity factor).

Q: What is a claims-made policy?

A claims-made policy is a form of insurance that provides coverage to an insured only if the policy is in force on the date the claim is first reported to the carrier and the incident causing the claim occurred after the “retroactive date” on the policy, usually the first date claims-made coverage was purchased from this insurance company.

Q: What is a retroactive date?

The retroactive date is the date on which coverage begins. Any claim that arises from an incident occurring on or after the retroactive date and reported while the policy is in force will be covered by the policy (subject to the terms and conditions of your policy).

Q: Is the retroactive date the date I start a claims-made policy?

Not always. If your policy includes prior acts coverage, the retroactive date may be the date you joined your prior carrier (or the date of your prior acts coverage with that carrier). If you were previously insured under an occurrence policy, purchased "tail" coverage from your previous carrier, or are new to practice, you may not need prior acts coverage or your new carrier may not offer prior acts coverage. In that case, your retroactive date will be the date you start a claims made policy.

Q: What is prior acts coverage?

Prior acts coverage, also referred to as "nose" coverage, is an extension of coverage in which your new carrier agrees to insure you for new, unreported claims arising from services you rendered while you were insured with your previous claims-made carrier. By purchasing prior acts coverage from your new carrier you eliminate the need to purchase an extended reporting period endorsement from your previous carrier.  However, the new carrier will require you to submit any claims you are already aware of to the prior carrier.

Q: What is an extended reporting period endorsement ("Tail")?

"Tail" coverage, or an extended reporting period endorsement, extends the time period after cancellation during which you are allowed to report claims that arise from medical incidents occurring while the policy was in force. The carrier may offer a limited time period or extend to perpetuity.

Q: What is a step rate?

As previously explained, claims-made policies insure you only if you're insured both on the date the incident happened and on the date you report it to your carrier. Usually, there is a delay between when the incident happens and when it is ultimately discovered and reported. This delay typically is at least one year, sometimes many years. For this reason, you are at less risk of reporting a claim to a carrier during your early years of coverage with that carrier, and this is why your premiums are much lower during that time. During the first year, you are insured only for those cases that occur and are reported during your first year of coverage. Since the likelihood of your having such a claim is minimal, your premium is at the lowest level during this first year. In the second year, your exposure is greater and your premium higher because coverage is for claims reported in the second year for incidents occurring during either the first or second year. This progression of upward premium steps continues until you reach the mature rate.

Q: What is meant by a “mature” rate?

At some point in time, all potential claims arising from services rendered during the first year of coverage should (theoretically) be reported already. This point in time is referred to as the mature year. Because the exposure levels off, premiums level off as well.  Generally policies reach maturity in five years. Note that premiums may increase or decrease during any year due to overall loss experience or other factors.)

Q: Do I always start out at a first year step the first year I join a carrier?

Not necessarily. Your step rate is determined by your retroactive date. If you are beginning practice for the first time, transferring from an occurrence policy, or purchasing a "tail" from your prior carrier, you will join a new claims-made carrier at a first year step. However, if you obtain prior acts coverage from your new carrier, your policy will be rated at whatever step you would be at had you been insured with the new carrier all along. If you have been insured under a claims-made policy for more than four years and elect to purchase prior acts coverage from your new company, you will most likely be rated at the "mature" (fifth year) rate.

Q: What is the difference between a rate increase and a claims-made step increase?

A rate increase is an increase in the base premium needed to offset increases in the frequency or severity of loss trends. (Similarly, decreases in the frequency or severity of loss trends may result in rate decreases.) It’s objective to maintain rate stability over the long term and to implement increases only when necessary.
Claims-made step increases, as explained earlier, are increases in premium due to the accumulation of exposures to loss over a given time period and are a natural progression of the claims-made policy. Step increases are based on the normal reporting patterns of claims and occur regardless of the severity or frequency of claims. It is possible that you may experience a rate increase or decrease in the same year that you experience a step increase.

Q: What is meant by "LIABILITY LIMITS"?

Liability limits are the maximum dollar amount of indemnity an insurance carrier will pay on your behalf. Limits are broken down into two categories: the per claim limit and the aggregate limit. For each medical incident, the carrier will pay for all damages up to a maximum of the amount listed as your "per claim" limit. The "aggregate" limit applies to all claims reported during the policy year or extended reporting period. For example, if your limits are $1,000,000 per claim/$4,000,000 aggregate, your carrier will pay up to $1,000,000 in settlement or award for each professional liability claim or suit and up to $4,000,000 for all claims reported that year.