Medical Malpractice: 4 Reasons Why Alternative Risk Transfer Solutions Make Sense
High medical malpractice costs inflict real pain on patients, doctors, hospitals, and nursing homes – as well as on insurers.
The results are fewer providers and rising rates. Professionals seeking medical malpractice insurance face complex choices available from traditional insurers, provider-owned groups (physicians and hospitals), and firms that offer alternative risk transfer solutions (ART).
For sound economic reasons, alternative risk transfer vehicles are becoming increasing popular. ARTs include risk retention groups, captive insurance companies, reciprocals, and purchasing groups – with the majority being risk retention groups or captives. Reasons for the popularity of ARTs include:
1. Increased Control -- The primary reasons for implementing an alternative risk transfer solution include control over underwriting guidelines and procedures, control of rates, control of coverage, and control of claims.
2. Improved Access to Coverage -- Certain physicians may find that coverage is not available in the commercial market because of the nature of their practice, claims history, or gaps in their coverage (periods of time where you may not have had coverage). ART solutions are better-positioned and provide the flexibility needed to administer such individual differences.
3. Reduced Risk Exposure -- Seekers of an alternative solution may be motivated to find a risk transfer vehicle that will not lump their exposure with those of poorer underwriting risks. Statistics support the theory that a few physicians are responsible for a majority of the medical malpractice claims.
4. Increased Versatility – Alternative risk transfer options, including the formation of onshore/offshore captives and risk retention groups, are becoming increasingly popular in the health care community because of the greater risk mitigation options they provide.
Alternative risk transfer vehicles, when structured and run properly, can help manage risk effectively and control insurance costs. In addition, ARTs bring the advantage of direct involvement in risk and loss control along with the potential for reduced premiums for health care practitioners.
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