Malpractice Insurance – The Financial Black Hole

By Tony Kendzior, CLU, ChFC

Medical malpractice insurance is seen as a necessary cost for any physician in private practice. It’s almost invisible, a monthly or annual outlay that no one pays much attention to until there is an issue to deal with or perhaps a premium increase.

Over the course of a 25 year medical career, at a current cost of $40,000 per year for many practice specialties, we’re talking about more than $2,000,000, assuming an annual cost of money of 5%. A huge majority of physicians never experience a claim of any consequence, yet it has “cost” them $2M.

I’ve yet to find any physician who has been offered a substantial refund of premiums paid. Have you ever met one? How would you react, if at age 60, you were offered $10,000 per month for the rest of your life, simply because you practiced good medicine. Is there any provision for that in your current contract?

Most states don’t recognize small insurance companies as beneficial holders for required medical malpractice coverage. Couple this with the fact that most medical practitioners aren’t insurance experts, and the end result is that doctors have only a few (very similar, quite expensive) malpractice insurance options.

Year after year, whether rates go up or go down or remain stable, doctors are funding their med-mal insurance and never seeing a return on the premiums they pay. That is changing. A company has surfaced that rewards you financially for continuing to practice good medicine. It’s name is Physicians Benefits Resource Risk Retention Group, Inc. and it has these characteristics:

• Provides coverage comparable to what you have now for similar annual premiums
• Regulated financial and insurance company reporting methodology as approved by every state
• Owned by the same individuals and medical groups that it insures
• Effectively turns an expense into an asset, owned by the participating physicians
• After 5 years, your medical group could recapture more than 50% of total premiums paid
• After 10 years, your medical group could recapture more than 100% of total premiums paid
• Ultimate return of initial investment in the insurance company at book value at retirement or no longer an insured MD

Those with the highest insurance rates, such as surgeons or OB/GYN doctors have the most to gain from self-insurance structures. Regardless of your specialty, this is not a short term solution. There is a cost to putting the ball in play so unless you expect this to last 3 years or more, don’t bother. But the longer you hold this insurance with fewer claims, the more assets will be available at its completion.

Black holes are not normally thought of as resulting in a positive outcome. The money you are now spending is unlikely to come back to you if you have few or no claims. But until and unless you are willing to look at a viable alternative, the premiums you pay now are flowing into a black hole.

To begin an understanding of how this idea might benefit you and your practice, here is a short web video entitled The Six Minute Solution. ( If you can’t spare six minutes, you have bigger problems than a black hole!)

The longer you hold this insurance, with fewer claims, the more assets will be available at its completion. Recapture lost wealth—you owe it to yourself to investigate.

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One thought on “Malpractice Insurance – The Financial Black Hole

  1. Concetta

    Thanks on your marvelous posting! I certainly enjoyed reading it,
    you will be a great author. I will be sure to bookmark
    your blog and definitely will come back in the foreseeable future.
    I want to encourage yourself to continue your great job, have a nice day!

    Reply

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