Are You Paying Too Little For Your Malpractice Insurance?

As with many important purchases, malpractice insurance reflects the principle that you often get what you pay for. Unlike consumer products that can be replaced if they fail, deficiencies in malpractice insurance may not become apparent until a claim arises—when it is too late to correct these deficiencies.

Malpractice Insurance Is Not a Commodity

Medical malpractice insurance should not be viewed as interchangeable from one carrier to another. Unlike auto or homeowners insurance, malpractice policies are not subject to the same level of regulatory oversight, and coverage terms, financial strength, and protections can vary significantly.

Many CRNAs are insured through non-admitted (unregulated) carriers rather than admitted (regulated) insurers. Understanding whether your insurer is admitted, financially stable, and properly rated is critical.

Questions to Ask About Your Insurance Company

When evaluating your malpractice coverage, it is important to understand who is providing it. Key questions include whether the company is admitted, whether it is rated by A.M. Best, and whether it has the financial resources to defend and pay claims over time.

Is Your Insurance Company Financially Prepared?

Anesthesia-related malpractice claims can be significant. Insurers must collect adequate premiums to support defense costs, settlements, and judgments—both now and in the future. Price alone should never be the deciding factor when selecting malpractice insurance.  If an insurance provider is not charging a premium sufficient to fund future claims, you might be left in a vulnerable state if the provider becomes financially insolvent. 

Understanding Risk and Premium Adequacy

Lower premiums often mean greater overall exposure for an insurance company. When premiums are insufficient, an insurer may struggle to pay claims or remain financially solvent, placing policyholders at risk.

Key Financial Indicators to Review

Three important measures can help evaluate an insurer’s financial health: net income, combined ratio, and policyholder surplus. Together, these indicators provide insight into profitability, risk exposure, and overall financial stability.

• Net Income: A company’s total earnings, calculated by subtracting total expenses from total earnings.  A positive number indicates a profit, a negative number a deficit.
• Combined Ratio: Measure used by insurance companies to help determine profitability, calculated by taking the total of both losses and expenses and then dividing that by the premium.  A ratio above 100% indicates the insurance company is making an underwriting profit while a ratio less than 100% indicates the company is paying out more in claims than the premiums being taken in.
• Policyholder Surplus: The difference between an insurance company’s assets and its liabilities; an insurance company’s net worth.

The Importance of A.M. Best Ratings

A.M. Best is the most widely recognized rating agency dedicated to the insurance industry. Its ratings reflect an independent evaluation of an insurer’s balance sheet strength, operating performance, and long-term stability. Choosing a well-rated insurer provides added confidence in your coverage.

Making an Informed Decision

Selecting malpractice insurance requires careful consideration of coverage terms, financial strength, and long-term reliability. Understanding these factors helps ensure protection when it matters most.