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Leading the way in medical professional liability
ProMutual brings focus and flexibility to a challenging market
By Elisabeth Boone, CPCU
If the chronicle of medical professional liability insurance were published in the popular press, chances are good it would top the list of best-selling works of fiction. Few people outside the insurance business would believe there could be a shred of truth in the triumphs, tragedies, and travails of the medical professional liability market over the last 40 years.
Few other lines of insurance face the myriad challenges that confront this market: wide swings in availability and affordability of coverage…soaring jury awards… heightened patient expectations…the relentlessly rising costs of health care…and today’s strident debate over the “right” way to effect reforms in health insurance and care delivery.
Even the name of this line was a problem. After decades of bad publicity and negative associations, the term “medical malpractice” is gradually being replaced by the crisp, businesslike “medical professional liability.”
Given this daunting array of concerns, it’s no wonder that major players, beginning with The St. Paul Companies in 2002, have withdrawn from the volatile medical professional liability market. The remaining capacity has been provided by a mix of specialist insurers, traditional carriers, physician- and hospital-owned captives, state underwriting pools, and various other alternative market mechanisms.
This dramatic restructuring of the market places increasing pressure on the carriers that remain, and it requires them to develop and implement new business models that are responsive to the realities of today’s vastly altered medical professional liability environment.
New eyes on old problems
Rising to these challenges is ProMutual Group of Boston, whose management team brings to this troubled market a fresh perspective and an array of resources designed to manage risks so they don’t become costly claims.
Now one of the top 10 providers of medical liability insurance in the country, ProMutual Group is an outgrowth of the Massachusetts Medical Joint Underwriting Association, which was established in 1975 at the height of the medical malpractice crisis that began in the early 1970s.
In 1992, after the passage of state legislation that changed the structure of the JUA, the organization was renamed as the Massachusetts Medical Professional Insurance Association; and in 1995 it was converted to a mutual insurance company called Medical Professional Mutual Insurance Company (ProMutual), which is the lead company in ProMutual Group. (See “Challenges and Solutions in Medical Professional Liability” in the February 2000 issue of Rough Notes and “ProMutual Group Med Mal Strategy Relies on Teamwork” in the October 2004 issue.)
Today ProMutual Group consists of six companies—ProMutual, ProSelect Insurance Company, ProSelect National Insurance Company, ProMutual Solutions Insurance Company, ProMutual Insurance Agency, and FinCor Holdings, Inc., which has five subsidiaries—and insures more than 22,000 physicians, surgeons, and dentists as well as hospitals, health centers, and clinics. “We have licenses in North Carolina and Virginia and plan to begin writing business there soon,” says Gregg L. Hanson, ProMutual’s chief operating officer. “We’re looking at possibly entering additional Mid-Atlantic states in 2011 or 2012.”
ProMutual Group distributes its products in the Northeast almost exclusively through independent agents, and field representatives work closely with agents to educate them about exposures and coverages and to help them build a profitable book of medical professional liability business.
Serving as president and chief executive officer of ProMutual Group is Richard W. Brewer, who joined the company in 2001 and whose background encompasses more than 40 years of experience in claims and underwriting as well as executive responsibilities with leading carriers. Brewer recently was honored as 2009 Insurance Professional of the Year by The Insurance Library Association of Boston, the successor to the Boston Board of Fire Underwriters.
The cycle lives
The underwriting cycle in this market is alive and well, Brewer observes, noting that strong profitability in the early 1990s gave way to a period of increasing losses, the failure or withdrawal of some companies, and finally a return to stability beginning about 2004. “Today,” Brewer remarks, “medical professional liability is one of the more profitable lines of property/casualty insurance.”
That profitability is hard won in light of the global economic meltdown and stock market collapse, comments John J. Donehue, senior vice president and chief financial officer. “We’ve weathered some very tough financial market conditions. Like the rest of the industry, we weren’t getting the great investment returns we had seen in the past.”
Although competition has intensified among medical professional liability insurers, “it’s a much more disciplined market,” notes Mike R. Kubik, vice president of marketing. “Throughout this cycle, we’ve experienced a lot of changes in the nature of capacity. Of the top ten medical professional liability insurers today, only two are multiline writers; the others are mutual insurers that have weathered good and bad times over decades of changes in the underwriting cycle.”
Expansion plan
In a major initiative to expand beyond its core market in the northeastern United States, ProMutual Group in August completed the acquisition of FinCor Holdings, Inc., a medical liability insurance and integrated risk management company based in Lansing, Michigan. Through its insurance subsidiaries, MHA Insurance Company and Washington Casualty Company, FinCor writes medical liability insurance in 11 Midwestern and Pacific Northwest states.
FinCor also is the parent of FinCor Solutions, a consultative insurance agency that offers both traditional and alternative market products; The Risk Management and Patient Safety Institute, Inc., a clinical risk management education facility; and Capital Risk Solutions, SPC, an offshore captive domiciled in the Cayman Islands. The FinCor units will retain their identities, and FinCor Holdings now operates as a subsidiary of ProMutual Group.
The FinCor acquisition, Brewer observes, represents an ambitious expansion initiative for ProMutual Group. “Before we acquired FinCor, ProMutual Group had moved from being a one-state entity when it was a Massachusetts JUA to a regional company operating in states along the Eastern seaboard,” he explains.
“A few years back, we reached a point where the business we wrote in other states surpassed our volume in Massachusetts. After significant discussion, we concluded that we would be better served by being a regional company that has markets in different states with different regulatory environments, different tort systems, different clients, and also different kinds and degrees of competition,” Brewer says. “Ultimately ProMutual made the decision to be multi-state, and we formed ProSelect to handle our out-of-state business.”
Brewer regards ProMutual Group’s expansion beyond Massachusetts into other northeastern states, and its acquisition of FinCor Holdings, as key elements in the company’s response to changing conditions in the market for medical professional liability insurance. “Now that we’re a multi-state entity, our next response is to write more business in the states into which we’ve expanded,” he explains.
“We’ve become strong and visible in those states; we’re among the top three writers in each of the New England states. The FinCor acquisition flows from that. Having already decided to become regional, with FinCor we’ve become a bigger regional,” Brewer asserts. “In addition to expanding our territory, the acquisition has allowed us to increase our penetration of the hospital market.”
Employing this strategy of measured expansion, Brewer says, “We continue to look at other states, and if an acquisition opportunity arises that would align with our strategic purposes, we will very likely pursue it.”
Occurrence coverage
During the capacity crises that have bedeviled the medical professional liability market over the years, most carriers stopped writing the coverage on an occurrence basis because of the uncertainty associated with the “long tail,” meaning that the insurer must pay a covered loss no matter how long ago it occurred. Physicians and hospitals were forced to purchase the less popular alternative, claims-made policies, which provide coverage based on when a claim is made rather than when a loss occurred.
As stability has returned to the medical professional liability market, carriers have become more willing to write occurrence coverage, and ProMutual Group has been offering it for several years. Thanks to rigorous risk management and strong defense against questionable claims, the company is able to close more than 70% of cases without payment.
Looking ahead, the ProMutual Group management team is confident that its carefully developed business model will continue to drive the measured growth it seeks.
“We’ve learned a lot from our experiences, and we’ve really stuck to our guns in terms of being vigilant, in terms of where we will go and how we will get there,” Kubik says. “We’ve been well served by our underwriting discipline and our conservative approach to growth. The other carriers that remain in this marketplace have done the same thing, and we believe this is what’s necessary for the market to remain stable and move beyond the wild cycles that have characterized the medical professional liability marketplace.”
For more information:
ProMutual Group
Web site: www.promutualgroup.com |
