MEDICAL malpractice insurance is not for the faint-hearted. Thisis a line that can be subject to great volatility, ashard-to-predict claim severity drives insurers out of themarket--or even out of business. To insure professionals likedoctors, agents and brokers also must be highly professionalthemselves, and have in-depth knowledge of the exposures facingphysicians and the products that can cover them. In short, theymust be specialists.

Professional Risk Associates is such a specialized agency. Sinceits inception in 1989, PRA has grown into a $68 million (premiumvolume) organization that has as clients more than 3,400physicians, as well as more than 1,000 ancillary health-careprofessionals and medical practices. The agency does business inVirginia, West Virginia, North Carolina, Maryland, Pennsylvania andthe District of Columbia.

Our clients are engaged in a wide range of practices. Some aresole practitioners, while others work with several other doctors,who may collectively employ a medical-office manager to look afterthe non-medical aspects of their practices. We typically findinsurance for the physician(s) in a practice; the physician'sprofessional corporation; and any nurses, midwives, nurseanesthetists or other medical personnel employed in the practice.We have a staff of 25 employees, including seven producers. Notcounting our newest producer, whom we recently promoted from ourmarketing department, each has at least eight years of experiencewith us. Since all we do is focus on medical professional liabilityinsurance, they've been able to develop a high level of expertisein that niche.

Marketing and sales

We stress the importance of referrals, constantly remindingproducers to ask for and follow up on them. Producers obtainreferrals not only from clients but also from accountants,attorneys and other professionals who have physicians asclients.

When we started the agency, advertising helped us generateleads. Now that we're one of the largest medical malpracticeagencies in this region, our advertising really is more forbranding purposes. Our ads appear in MD News and Virginia MedicalLaw Report, regional publications with circulation in Virginia. Tohelp us get referrals from attorneys, we also advertise in LawyersMedical Weekly, a Virginia magazine targeted to lawyers whorepresent health-care professionals.

Working with associations is another key part of our marketingplan. We attend meetings held by a number of associationsrepresenting medical-office managers as well as events conducted byvarious physicians groups. In addition to generating leads for us,our attendance at these meetings essentially serves a brandingpurpose, much as our advertising does. However, the most importantresult of attending these meetings is the personal contact that wehave with clients and their professional managers.

All leads we obtain, from whatever source, are entered into aportion of our computer system that serves as our prospectdatabase. It tracks prospective clients from the time they enterthe system until they become clients. It also keeps producers fromcompeting with one another for the same opportunity and alertsproducers of the next scheduled personal contact for a prospect.Our system also automatically generates thank-you letters from theagency's president when new accounts are written or existing onesare renewed. Whenever we lose an account, the computer creates aletter expressing our regret and asking if there is anything we cando to improve our service.

We sometimes create special programs for physicians. Forinstance, we worked with one of our carriers to create a programfor obstetricians and gynecologists. The way this program cameabout also illustrates the importance of relationships andreferrals. One of our producers arranged coverage for a couple ofVirginia doctors with OB-GYN practices. After they became PRAclients, they asked if it would be possible for us to find coveragefor other physicians in a medical organization to which theybelonged.

We currently administer programs for 10 medical organizations.Each is assigned to one of our producers, who tend to work indifferent geographical areas. One might work with groups in NorthCarolina, another in West Virginia, etc. The programs are posted onour Web site, along with the names of the assigned producers.Members of the organizations are invited to click on a linkenabling them to get premium indications. The Web site, however,primarily exists for informational purposes. It averages about 25requests for premium indications a month.

Qualifying and submitting accounts

The condition of the marketplace for medical malpracticeinsurance has an important bearing on our prospecting efforts. Inthe first two years of this decade and perhaps a year or twobefore, it was very much a seller's market in the Mid-Atlanticregion. Major companies like CNA and St. Paul withdrew from themarket and The Reciprocal Group, a Virginia-domiciled insurer, wasplaced in receivership. We received many calls from doctors who hadbeen insured by these and other carriers, as well as referrals fromphysicians who knew of peers who were searching for coverage.

In addition to disruptions in the marketplace, price canmotivate physicians to entertain competing proposals. In the softmarket of the 1990s, it was not too difficult to sell annual rateincreases of 10% to 20%. But once those increases rose to 30% andhigher, doctors became more willing to shop for coverage. Thatwillingness has been tempered, however, by a desire to not gothrough another carrier insolvency or withdrawal. Doctors thesedays are asking more questions about carriers' A.M.Best-ratings-and the outlook on those ratings. They also wantinformation about carriers' defense attorneys and the particularsof their policies. We're pleased with this development, becausewe've always regarded the selling process as a teaching exercise.We believe the more a client knows about medical malpracticeinsurance, the stronger our position will be.

A typical application for medical malpractice insurance is 10 ormore pages long. Furthermore, standard insurers will not quote fromothers' applications. (Surplus-lines carriers will; but requiretheir own applications to be completed before providing coverage.)Consequently, determining which carrier to approach is an importanttask for our producers. After a detailed consultation with aprospect, the producer selects the carrier or carriers, based onsuch factors and the nature of the physician's practice, his or herloss experience, and the state in which he or she is licensed.

Normally, a doctor's office manager can complete some of themore generic parts of the application. We also can use our computerto help fill in a lot of this information, especially on a renewalapplication. Still, a doctor must spend a considerable amount ofhis or her own valuable time with the form, which underscores theimportance of selecting the right insurer (and applications) fromthe outset. We check the completed applications to ensure allquestions are answered and all required supplementary material isprovided. If we don't send an underwriter a complete package, it'snot going to get his or her attention or favorableconsideration.

In addition to the application, insurers require a doctor'scurriculum vitae, which an underwriter will examine to ensure theinformation on it is consistent with what has been provided on theapplication in regard to educational background, boardcertifications, medical licenses, etc. Doctors also must furnishloss runs going back at least five years. Depending on what theyshow, an insurer subsequently may request loss runs going back 10to 20 years. These must be company-provided loss runs, which forthe most part the physicians themselves must request. If a doctorhas been insured by three or four carriers over the past 10 to 15years, it can be quite a challenge for us and the physician toobtain all the necessary information.

A big reason for our success is that we can give doctors anumber of options. We represent numerous admitted markets formedical malpractice insurance, a number of them regional. Since wehold a surplus-lines license in most of the states in which we dobusiness, we also can arrange coverage for doctors who practicehard to place specialties or have adverse loss histories-even forso-called "impaired" physicians, e.g., those who have been treatedfor substance abuse.

Products

For the most part, the medical malpractice policies offered bystandard insurers are fairly similar. Most insure "medicalservices," which are a physician's activities related to his or hermedical practice. Claims-made coverage is the norm. In the past,insurers customarily permitted insureds to report incidents. Ifthey subsequently gave rise to claims, they would be covered by theclaims-made policy in force at the time of the incident report.Increasingly, however, insurers have been restricting coverage tothe actual reporting of a claim, although state laws can have abearing on this issue.

We've also seen restrictions in the free extended reportingperiods, or "tails," that insurers commonly offer to retiringdoctors. A few years ago, several insurers offered this benefit tophysicians who retired at any age, including those they had insuredfor only a year. Today, free tails more commonly are offered onlyto doctors who are at least 55 and who have been insured by thecarrier for a minimum of five years.

Prior-acts coverage is an important issue to discuss withphysicians. If a doctor is moving to a new state from one whoselaws (e.g., statutes of limitation), demographics or othercharacteristics have led to above-average claims frequency orseverity, the insurer in the new state likely will force the doctorto "tail out" under his or her previous policy, rather than provideprior-acts coverage. Such likely would be the case for a physicianmoving to Virginia from states like Florida, New York or Illinois.Indefinite tail coverage, which is the norm for standardmedical-malpractice insurers (and pretty much a necessity from theviewpoint of doctors), can be extremely expensive. Those producerswho instead can persuade new insurers to provide prior-actscoverage, as ours typically do, can prove their value toinsureds.

Underwriting standards have an important bearing on ourdiscussions with clients. Most medical malpractice policiesavailable from admitted carriers have the same exclusions; but intheir underwriting standards, the insurers may have significantdifferences. Some companies, for instance, want nothing to do withdoctors who have any kind of exposure to nursing homes orcorrectional facilities. Many are not interested in physicians whoperform bariatric surgery (stomach stapling). Some may shun clinicsor gynecologists involved in infertility work. Typically, questionsabout such problematic exposures appear on the insurer'sapplication. Again, by having a thorough knowledge of our carriers'underwriting requirements, we can direct applications to themarkets most likely to accept them, thereby saving the clients' andthe company's valuable time.

Renewals and service

Each of our producers has a sales assistant, and they play animportant role in our renewal procedures. Our computer systemautomatically notifies them of renewals at least 90 days in advanceof policy expiration. They contact the insureds to remind them ofthe renewals and to gather information about any changes in theirpractices or ancillary medical personnel. The sales assistants alsowork directly with the underwriters to obtain renewal quotes.Depending on the nature of an insured's practice, some insurers mayrequire the submission of renewal applications. Additionally, wetypically obtain rate indications from two or three competingcarriers to be sure our ultimate recommendation to our client isvalid. After sales assistants receive renewal quotes andindications from the carriers, they discuss them with theproducers, who decide what to recommend to the client for renewal.We send renewal quotes to clients with a form on which we ask themto acknowledge their acceptance by signing and returning it to us.Once we have the signed forms, we notify the insurers. We invoiceand collect premiums for one of our carriers. For all that do notoffer installment billing, we give our clients the option tofinance their premiums through a third party.

Examples of typical service requirements for medical malpracticeclients include discussing tail coverage with any physician leavinga practice and providing certificates of insurance. As part oftheir credentialing procedures, hospitals at which any of ourclients have privileges require certificates upon renewal ofcoverage. We also help doctors furnish claims histories to providernetworks or other parties that require them. We frequently getinquiries from clients about the status of premium invoices andpayments, and have accounting personnel dedicated solely tohandling such inquiries. We're in the process of upgrading our Website, the goal being to enable our clients to use it to accesstheir account information in our database.

All of our carriers provide risk management services. Someconduct seminars that confer continuing medical education (CME)credits on those doctors who attend. Some insurers send lossspecialists to the physicians' offices to observe practices for aday or two and then make recommendations to the doctors or theiroffice managers. Suggestions typically pertain to how doctorscommunicate with clients and staff, and how procedures aredocumented.

When we started Professional Risk Associates in 1989, our planwas to grow into an organization that could meet the needs of awide array of doctors and that would come to be viewed by them asan important partner, one they could rely on through changingmarket conditions to secure insurance that is indispensable totheir practices. As we look back on our first 15 years, we arepleased to conclude that the operation was a success.

John Glander is president of Professional Risk Associates Inc.,an agency specializing in medical malpractice insurance that hefounded in 1989. He left a career in the metal packaging industryin the 1980s, first to become vice president of sales for medicalmalpractice insurance at a Maryland agency and later to head upPRA. Robert Meadows is PRA's executive vice president. He enteredthe insurance industry in 1972 and worked in claims, underwritingand senior management for a number of carriers before joining PRAin 1999.