Shopping for malpractice insurance? Learn from the experts

That's a bad bargain. "Many physicians don't pay enough attention to a carrier's financial security," says Philip Reischman, president and CEO of Gallagher Healthcare Insurance Services, headquartered in Houston. And if that carrier goes belly up, he says, doctors could end up losing much more than they'll save by shopping for a bargain.

To be sure, the cost issue can't be totally ignored, especially in markets like this one. But, say Reischman and others, there are a range of other considerations, including a company's fiscal health, its track record on handling claims, and its willingness to give policyholders a say in resolving claims, that ought to enter into the equation.

Whatever route you take, here are the major questions to ask:

What type of med-mal insurer is best for you?

There are basically two types of carriers for doctors in small-and medium-size practices: commercial carriers, which are public, for-profit corporations owned by their stockholders, and mutual or reciprocal carriers, which most of the physician-owned-and-operated companies are. (Doctors in larger groups sometimes turn to "captives," risk-retention groups, and other options in what's known as the alternative insurance market.)

Not surprisingly, each type of insurer has its champions-as well as its detractors. For certain high-risk specialties, the major benefit of commercial carriers is often a more competitive premium than physician-owned companies offer. But the major flaw of commercial carriers, say critics, is that they're often too bottom-line driven, which makes them more eager than physician-owned companies to settle claims in order to save on legal fees.

For more information on doctor-owned-and-operated carriers, check with the Physician Insurers Association of America, the trade association for the industry ( http://www.thepiaa.org). There's nothing comparable to PIAA on the commercial side, but the American Insurance Association represents med-mal insurers as well as others ( http://www.aiadc.org).

How financially stable is the company?

Just as crucial as the type of company you choose is its fiscal health. "There's no set of attributes that a company can possess, no matter how wonderful, that can make up for insolvency," says oncologist Richard E. Anderson, chairman and CEO of The Doctors Company, a leading physician-owned medical malpractice insurer.

This dictum is well illustrated by the insolvency of Ohio-based PIE Mutual Insurance Co. in 1997. Nearly 15,000 physicians not only lost millions of dollars in uncovered premiums, they also had to quickly purchase replacement coverage from other carriers, often at higher rates. Doctors who had unpaid claims against them were forced to rely on their state's guaranty fund.