Transferring to other Medical Professional Liability Insurance policies: What are the Tail implications?
As featured by Fairfield County Medical Association
The medical professional liability (MPL) market has entered a dynamic cycle in which premiums are rising and underwriting mentality is shifting. Many of the nation’s largest, most well financed MPL carriers have announced rate increases over the past 12 months. Further, underwriting appetite has evolved considerably from aggressive and lenient to cautious and stringent. Evidence of this abrupt change has been felt by most specialties throughout the majority of the country. Connecticut is no exception. A shift of this significance has resulted in a marked change in the price and availability of coverage for some physicians, but options remain. When exploring better coverage options and prior to making any decisions, physicians should consider extended reporting (“tail”) coverage, as well as the financial stability of the prospective insurer.
A major factor in whether to change MPL carriers is determining the tail implications of the transition. A tail covers all exposure accumulated from the physician’s retroactive date through their policy termination date. Historically, a tail has been granted at no cost if a physician – at the time of permanent retirement – satisfies two main provisions: being insured on a claims made policy with a company for at least five consecutive years and being at least a certain age (55-65). These criteria have led physicians to remain with their current carrier, despite the opportunity for premium savings elsewhere in the market, so they do not need to work five more years with the new company in order to earn a free tail.
Fortunately, several of Connecticut’s “A” Rated insurers have changed their criteria. Now, many require a physician to be insured with them for one year (while having been on a claims made policy with them or another carrier for the previous 48+ months) and no longer have a minimum age requirement. As most physicians in Connecticut are insured on claims made policies, they now have a greater ability to change carriers and realize premium savings. It is of critical importance to review each company’s specific ‘free’ tail criteria prior to making any transition.
It is also critical to consider the financial strength and stability of the market’s carriers.
Connecticut has seen an increase in competition from many of the region’s most financially sound, “A” Rated companies. This competition has led to opportunities for physicians to ‘shop’ for better pricing and coverage. While accepting an increased renewal premium is no longer a necessity, proper diligence is required to select a new quality, well financed company for the future.
Consulting with an experienced, dedicated MPL advisor at the outset of this diligence process is paramount.
Brian S. Kern, Esq., Partner, Acadia Professional.