Maturing Insurance Premiums and What to Expect for Medical Malpractice Insurance
Written by Stephen Lim, Lic #0M66738
Many clients tend to wonder why their premiums increase yearly over the first five years of having a claims-made insurance policy for professional liability insurance. I believe it is the duty of the agent who is servicing you to disclose to you the ramifications of claims-made policies written for professional liability insurance, specifically medical malpractice insurance. Oftentimes, information about maturing premiums is not disclosed or provided to the insured so that they can make better-informed decisions. You can read more about claims-made policies here in this article: https://calattendingphysicians.com/blog/claims-made-occurrence-made-and-erp-medical-malpractice-insurance-policies
Typically, occurrence-made policies do not mature in premium. However, you may expect those premiums to increase at times due to rate increases within specific classifications, loss of any previously-applied discounts, or updated state-filed ratings from the insurance company. This basically means that the insurance company deemed that the insurance provided needs to be a little bit more expensive or less money than initially filed with a state. Occurrence-made policies typically do not have a maturity schedule unless you have discounts applied, such as new graduates or claims-free discounts.
On the other spectrum, claims-made policies with a retroactive date at inception for individuals typically are set to mature over the first 5 years. This means that the premium will be at the lowest on your first year and increase year after year for up to 5 years until it reaches maturity. What does this mean?
Maturity simply means that the exposures the policy is covering and the premiums collected are adequate enough to cover claims for the insured. In layman's terms, it basically means that your first-year exposures are the least amount of risk for the insurance company because you have seen minimal patients and minimal exposure. But as those years go on, and the number of years continues to increase in your prior acts, the exposure numbers increase and so does the insurance premium.
Most insurance companies, when we quote our clients, will not provide a maturity schedule as that rate cannot be justified or calculated in advance. However, there are some carriers that are willing to offer a maturity schedule upfront so we can know what to expect. It is vital to ask your agent who is handling your medical malpractice insurance about the possibilities of a maturity schedule in your policy.
There is also one other thing to keep in mind, which is the ability to switch carriers at renewal time. If the renewal premium is significantly higher than expected, you can always switch carriers, maintain your retroactive date, and continue your maturity schedule and your policy with a new carrier. We hope that this information has been helpful to any physicians and healthcare providers looking for insurance and planning out their path of protection from liabilities.
