So if you pay $45,000 for your malpractice insurance coverage, the broker is paid $4500 by the insurance company. I write ‘paid by the insurer,’ since this commission is built into the rates. If you went directly to an insurer to buy your coverage, the insurer would not lower your premium for the broker commission; it would keep the money even if you have no broker.

The next area of compensation for a broker is fees. An insurance broker has to disclose any fee charged to the client by law as broker fees. You will see fees ranging from $350 to $1000. This is extra compensation that a broker charges to cover his/her overhead. Many brokerages cannot make a profit on premiums below $50K or even $100K depending on the type of service they provide, and the expense of the staff providing those services. The only other fees that you will see that are normal and legitimate are premium taxes and a stamping fee (effective 2/1/10 at 3.225% for CA). This money does not go to the broker, but to the state and the 3rd party company who files the tax, respectively.

We encountered a brokerage who charged 30% of the premiums in fees, and 15% in commission so its total compensation was 45%. We will call this broker ABC. It hid these fees in the insurance quote, and called them policy fees, binding fees, underwriting fees et al. This is not ethical, since all these fees should have been called broker fees since that is who these fees are paid to.

If you ever see fees other than a broker fee and premium tax on a quote for your medical malpractice insurance, ask questions. Also if you are financing your premium, make sure you read the fine print on your premium finance quote. Most brokers will arrange financing and will charge a small fee, which slightly increases the interest rate.

But the ABC broker we found, who was charging the 45% compensation was also charging big fees on the financing. So an interest rate that should have been 8% or 9% was in fact 22%, since the broker added another 5% of commission which it buried in the financing. Therefore the total compensation was 50%, unbelievable!

The other sign that you have a non-ethical broker is if he/she pushes you toward a Risk Retention Group or RRG, without offering an “A” rated AM Best insurer. AM Best Rating is an industry rating system for insurance companies, that’s not fool proof but considered good for evaluating the financial strength of medical malpractice insurers. In my opinion, RRG’s are a very legitimate option for malpractice insurance, if the financially rated insurers are unaffordable or they will not cover you for your risk. Brokers like ABC love to recommend RRG’s since they can be cheaper than a normal insurer, because RRG’s charge for reserves like insurers do.

Brokers, like ABC, offer doctors RRG quotes with big savings, and will then add big fees to that cheaper RRG insurance quote. Here are some concerns associated with an RRG, which a broker should explain prior to placing you with one:

• In the event of bankruptcy (RRG’s have a much bigger chance of becoming insolvent than an “A” rated AM Best normal insurer). A judge could order you and all the members of the RRG to pay for the run out of claims of the bankrupt RRG for as long as it takes to pay every claim. This means you may be stuck paying double insurance premiums, your new insurer who replaced the bankrupted RRG, and the bankrupt RRG who you’ve been ordered to fund till it unwinds.

• If you are in an RRG, most of the standard insurers will not take you till you change to an “A” category rated AM Best insurance company.

• Some hospitals will not credential a doctor if he is with an RRG. A broker should have you check with your hospitals prior to buying an RRG.

• If an RRG goes bankrupt, while you have an open claim, then it will not likely be able to pay your lawyer’s bills for defense, and your attorney will come to you for payment, and any judgment will be your personal liability.

If you have a good honest broker, he will tell you all of this. If you have a broker like ABC, all he/she will talk about is the savings, while he/she makes an obscene compensation while charging you outrageous fees.

About HCP National Insurance Services

HCP National is a one-stop shop for all your insurance needs. We provide all lines of insurance coverage including employment risk management, ASO and Stop Loss Insurance, Fully Insured Managed Care Programs, Medical Malpractice E & O and D & O, Reinsurance, Product Liability, BOP’s, Workers Compensation, All Forms of Property and Casualty Insurance.

At HCP National Insurance Services Inc., we provide a comprehensive and economical portfolio of insurance and reinsurance products and services to meet your company’s needs. Come visit our website at HCP National Insurance

Article Source: http://EzineArticles.com/?expert=William_D._Dyer

A good broker also can shop your insurance to make sure you have the best deal. They can be an advocate with your insurer if you have issues with them. They also can explain how your coverage works.

The challenge is how to find an expert broker in medical malpractice insurance in the California market. You need to find someone who is ethical and will look out for your interests. I wish a prospect for insurance could sit in our office for a week and see how hard all of us work to do the right thing, because there are many competitors who do not.

Finding a good broker:

• Ask a colleague who he/she uses

• Respond to a mailer asking the company for the name and number of their Norcal or Medical Protective representative. Call the company marketing representatives at Norcal and Medical Protective to confirm that the company is appointed with both insurers. This is a good indication that the broker does a lot of medical malpractice work and that they have been vetted by these insurers.

Note: I do not mention The Doctors Company (TDC); since they appoint very few agents and those they do appoint are often direct writers (can only place with TDC). So the fact that the agent does not have an appointment with the TDC does not indicate that he/she is not an expert in medical malpractice. Also, a non appointed broker can give you a TDC quote through an intermediary.

• Once you have spoken with Medical Protective and Norcal, ask the broker how many clients he/she has currently. You want someone with 50 or more clients, which indicates his/her expertise. Then ask for access to a list of all his/her insurers that he/she can go to on your behalf.

How do I know my broker is doing the right thing by me?

• If you are in the standard market (TDC, Norcal and Med Pro), you have the cheapest deals. These standard insurers are the lowest cost insurers and have the best terms, so in most cases there is no reason for the broker to shop for your insurance coverage since you have the best deal. If you are in the non standard insurance market, then your broker should shop for your insurance coverage every year, as well as try to help you re-apply into the standard market with the hope that it will accept you.

• Assuming you are in the expensive, non standard market, you want your broker to go to at least 5 to 8 insurers. You want a list of the responses and quotes if applicable. Also, if you want proof of inquiries, ask for evidence like emails or letters the broker received from the underwriter or intermediary.

• Check all quotes to ensure your specialty is listed and your retro date is included. Sometimes underhanded sales people will sell coverage with no retro date. We had a client who left us for a cheaper deal, which he received as a result of his new broker dropping his retro back to 2004. So any person who was harmed prior to the effective date of his cheaper policy, sues the doctor today, for a past event, the doctor will not be covered.

• Look at the fees that you are charged. Brokers are permitted to charge fees, but they must identify them as a broker fees. Most range from $350 to $500. There is a broker who we have encountered, who charges not only the usual fee, but also numerous other fees calling them processing fees, policy fees et al. Inquire about these fees and if the broker does not give you valid reasons for the charges, find a new broker. This broker received the normal 10% commission plus broker fees disguised as something else, running away with 30%-50% on a deal which is obscene and disgraceful to our profession.

• Watch out for brokers offering Risk Retention Groups (RRG’S). These are deals where you are part of a self insured deal. They will say they have reinsurance and other items of security. But in reality if they run into financial problems they can come back and ask for more money, more than the premium that you paid, and you have to pay as mush as they need. We had a client who joined RRG’s, before coming to us, who went bankrupt and had to pay over $250,000, including legal fees, to pay what he owed the RRG. If you come across brokers who offer this option and do not tell you the truth about the downside of an RRG – RUN! Buy from a real insurance company where you pay your premiums and that is all you owe.

Do I need more than one broker?

• If the above criteria are met, then no you do not need more than one broker. Allow the person, who is doing the right thing to do his/her job and you will develop a relationship with that broker. If he/she does not meet these criteria, then find a new broker. If you want more than one broker to bid for your insurance, then choose two. Have this outside broker shop 30 days prior to your renewal date and not any sooner.If your current broker is truly shopping your insurance, then he/she should have started 30 days prior to your renewal date. The insurance companies release quotes to the first person who submits his/her risk to them. Those who come later are denied access. If your broker is doing his/her job, this outside broker should be denied a quote. When this happens the outside broker may call you asking for a broker of record letter, which is a signed document from the insured stating that a broker or agent is representing the insured. Do not grant this! Conversely, if the current broker finds he cannot access all his insurers that he/she went to, and if he/she comes asking for a broker of record letter, do not grant this either! If your current broker did his/her job properly, then he/she should have submitted your risk to all the insurers prior to the 30 days. You may also receive a call by either broker saying that it’s bad to have another broker (all sales talk). You will get calls saying, “I am blocked” (not a lack of fiber). It means your current broker or the outside one did the job properly, therefore do not undermine him/her by issuing a broker of record letter.

• If a broker brings you his/her bid that he/she put hours of work into obtaining without any compensation (since brokers do not get paid till they get your order to place the coverage), then please do not give his/her medical malpractice quote to someone else. This is not a good business practice, nor is it ethical. We all have families to support and businesses to run. This is a small market thus you will get a bad reputation for doing this, and no reputable brokers will work with you again.

About HCP National Insurance Services

HCP National is a one-stop shop for all your insurance needs. We provide all lines of insurance coverage including employment risk management, ASO and Stop Loss Insurance, Fully Insured Managed Care Programs, Medical Malpractice E & O and D & O, Reinsurance, Product Liability, BOP’s, Workers Compensation, All Forms of Property and Casualty Insurance.

At HCP National Insurance Services Inc., we provide a comprehensive and economical portfolio of insurance and reinsurance products and services to meet your company’s needs. Come visit our website at HCP National Insurance.

Article Source: http://EzineArticles.com/?expert=William_Davis_Dyer

His Bookkeeper was always paying bills late to maximize cash flow, including his medical malpractice insurance. Expenses were exceeding revenue, and the bookkeeper kept ignoring the late notices/cancellation notices from the medical malpractice insurance company.

Eventually the insurer issued a final cancellation notice. While this was happening, the doctor had a minor criminal conviction, unrelated to quality of care, thus his license was put on probation.

We intervened with the insurer who checked the doctor’s license and probation, but decided not to reinstate him for that reason. It is easier for an insurer to not reinstate an MD who was canceled, than to cancel his insurance at renewal. Normally this doctor more than likely would have been renewed even with his licensing probation, since he had no claims and was a clean risk. He is now out of the standard market.

We scrambled, but no other standard insurers would take him for his med mal insurance. He has lost his prior acts coverage, so any claims prior to the cancellation that are made now are not covered. The non standard insurers quoted a $10K deductible for his medical malpractice insurance, which he never had with his former insurer. He has no free tail therefore it will cost him 2 to 3 times the annual premium if he wants to retire with tail. He lost his unlimited coverage for defense. Now the defense coverage is inside the limits, and he pays 30% more for his med mal insurance.

When we spoke with the doctor, he had no clue that his medical malpractice insurance was canceled. He fired his bookkeeper and hired us to get him back into the standard insurance market which will take a few years. Meanwhile, he runs the risk of being sued from his past services, with no insurance to protect him because he lost his prior acts.

Doctors, let your bookkeepers or controllers know that the first bill to pay is the Medical Malpractice Insurance bill. You can lay off employees or cut salaries, but pay this bill first and on time. Uncovered medical malpractice claims, due to loss of coverage, can wipe out the practice and possibly your personal assets.

About HCP National Insurance Services

HCP National is a one-stop shop for all your insurance needs. We provide all lines of insurance coverage including employment risk management, ASO and Stop Loss Insurance, Fully Insured Managed Care Programs, Medical Malpractice E & O and D & O, Reinsurance, Product Liability, BOP’s, Workers Compensation, All Forms of Property and Casualty Insurance.

At HCP National Insurance Services Inc., we provide a comprehensive and economical portfolio of insurance and reinsurance products and services to meet your company’s needs. Come visit our website at HCP National Insurance

Article Source: http://EzineArticles.com/?expert=William_Davis_Dyer