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Hello everyone. Thank you for joining our podcast today. This is Phil Lawson, Vice President, Product Development and Risk. Today we’ll talk about insurance, some basic fundamentals.
Before I begin, I must say that you healthcare professionals are to be congratulated for the noble work that you do and be recognized for the positive difference that you bring to people’s lives every day. You are all healing change agents helping people throughout all walks of life, making life better. There’s no greater cause than your passionate and skilled contributions to people. That’s why we have your back here at the risk retention group that the policyholders own that is insuring them. We are dedicated to your wellbeing and to your protection. Our nation truly values your services now and into the future as shown by the following statistics.
You may be interested to know that the US Department of Labor and Bureau of Labor Statistics in 2016 forecasted the following to occur for the next 10 years through 2026.
The healthcare field is booming. A look at the fastest growing 30 occupations of all occupations in the nation indicates that eight are in the allied health sector. This sector contains a wide variety of healthcare and behavioral healthcare workers and related occupations in therapy. These occupations account for 4.9 million workers today and will be over 13 million workers in only 10 years, which is a 32% growth rate over the decade. That’s over four times the average growth rate compared to all other occupations in the US. So you are currently working in a growing and very important and highly valued field.
With respect to insurance, there’s a lot of ways we can go to this. I want to give you just a couple of basics on insurance and we can add to that as we hold additional podcasts.
As a licensed healthcare practitioner, there’s no doubt that you have a professional liability policy and you’re probably should have a cyber or data breach liability insurance policy to insure you from HIPAA violations for third party information breach, and also a general liability insurance policy covering your office, bodily injury and third party property, particularly if you have an office or you hold conferences offsite.
We’ll discuss some of the most important liability insurance terms that you need to know during this brief podcast.
What’s an insurance agent or insurance agency? We found that a lot of insureds confused their insurance producer, their agent, with the carrier. They’re two different parties. The carrier takes the risk. The insurance agent is a commissioned salesperson that sells a policy. So when you buy your policy from ABC Agency, it’s not a carrier. A lot of people think that, oh, I buy it from ABC Agency Company and they think that they’re the carrier, but they’re really not.
The insurance agency or agent is the party that’s licensed in the state to sell you the insurance. The insurance is underwritten by a corporation somewhere, either off offshore or somewhere in the United States, a different state, but it’s a different corporation that takes the actual risk and they’re paying a commission to the insurance agent to sell the policy to you. The agent does not take the insurance risk. That’s the insurance company, or also called the carrier, that creates the insurance product and files it in the States that it sells it in and takes the insurance risk. Many times the insurance company will offload some of that risk with a re-insurance carrier.
Now, the carrier appoints the agency to sell its insurance products and sometimes collects a premium for you. When you buy an insurance policy from an agent, find out who the carrier is and the carrier’s reputation because that’s the entity that stands behind the policy that actually pays your claim.
Also, ask the agent what the commission rate is that the agency receives from the insurance carrier. The higher the commission rate, the more you pay in premium. The insurance agent or agency is simply a commissioned paid sales intermediary whose allegiance is to the carrier who pays the agent the sales commission.
Remember that the insurance carrier appoints the agent and the agent, therefore, works for the insurance carrier and not for you.
The risk retention group is owned by its policyholders and assurance services acts as the agency and has the lowest cost in the industry because they’re not driven by Wall Street profits. The assurance services pass most of the commission back to you in lower premiums and better benefits. Agents take no insurance risk and are focused on their own commission from selling an insurance policy to you.
Now we have a something called hazards and perils. These are the reasons why people buy insurance. It’s why insurance exists. It shifts the risk of hazards and perils from you, or the insured, to the insurance carrier. Insurance policies are contracts between the insured and the policyholder, which is you, and the insurance carrier that shifts the certain risks that are specified in the policy contract from the insured, or the policyholder to the insurance carrier in exchange for premium dollars paid by the insured to the insurance carrier with part of the premium going to the insurance agent and commissions.
A hazard is any exposure that increases the possibility of a loss. For example, maintain your client records in a file cabinet or with a third party storage facility or on a data storage company’s record server, they all expose you to the hazard of an information breach as defined by HIPAA.
A peril is a cause of the loss that arises when an incident occurs. And this can be a client’s record breach, a licensing board inquiry or a subpoena for records or maybe a deposition or even a fire in your office, a slip and fall in your office or stolen property during an office therapy session or conference offsite that you’re holding, or maybe a misdirected facts of client information or getting caught up in a client divorce proceeding. Perils are wide-ranging. Insurance carriers make more money by selectively excluding certain perils that are common, so look for that in your policy.
They also limit coverage for certain perils to such a high extent that coverage is de facto non-existent. They do this by covertly writing their policies in such confusing language or simply overtly expressing excluding certain coverage. Contrary to this philosophy, the risk retention group offers comprehensive coverage in easy to understand and very clear language in all of its insurance products. Comprehensive in this insurance context means a generously wide and deep coverage for perils.
You must look very thoroughly into your policy contract language to understand what the insurance carrier has carved out, i.e. a written exclusion, or inferred out which is silent as to coverage and what the insurance agent did not tell you what was excluded.
Remember the insurance agent wants to sell you a policy to earn a commission. Your coverage needs are secondary.
Here are some examples. Most professional liability policies are also those that say that they have general liability coverage except for the risk retention group policy. These exclude coverage for misdirected faxes or HIPAA information breach, slip and falls. Some carriers exclude coverage for slip and fall unless the incident actually occurs during professional services being delivered and during therapy in your office during an actual therapy session. This is overly limited coverage, which really borders on vapor.
Let’s talk about limits and sub-limits. You’ll hear that a lot when shopping for insurance.
A limit is the largest or the aggregate amount that the insurance carrier will pay for a covered loss under the insurance policy contract. Many policies have multiple limits such as per accident or incident or per person. Many policies limit the actual number of occurrences or incidents in a given policy period, usually a year.
A sub-limit is part of or rather than in addition to a policy limit. These are extra limitations regarding certain losses. For example, the risk retention group professional liability policy with a one million, three million limit, allows for up to six deposition claims to be covered at any one policy year with a supplement of 5,000 per deposition claim. That’s a total of $35,000 of sub-limit deposition coverage in any one year.
The risk retention group general liability policy has a one million, three million dollar limit with no limit on the number of fires within the scope of the perils. Other insurance carriers limit fires to only one incident per policy year and appose a $50,000 sub-limit. Some go as high as 200 to 250,000, but the risk retention group’s sub-limit on fire claims goes up to a million during the policy period.
Again, there’s no limit on the actual number of claims incidents arising from a fire peril. The reason you have this is fire is a very frequent incident and a very frequent claim in the industry. You will not find a competitor that’s as generous and comprehensive anywhere as the risk retention groups’ general liability policy.
The last definition I want to go over is the insurance claim. This is a formal request to the insurance carrier by the policyholder or the insured based on the terms of the insurance policy contract. This is where the actual coverage aspect gets complex and it’s called into question.
First, you have an incident, but that doesn’t necessarily qualify as a claim until it’s reconciled with a policy contract. And once it’s reconciled with a policy contract, that is a legitimate incident that’s eligible to be a claim, then it’s treated as such and adjudicated.
Remember insurance companies lose money when claims are presented and therefore the insurance policy contract interpretations by carrier’ claims departments have a habit of developing loopholes for a carrier to hide behind in order to deny claims being paid. This is especially true with for-profit Wall Street insurance companies. They want to cover those loopholes and not pay claims unless they have to. This is why they write their insurance policy contracts with exclusions and they often covertly use confusing language to achieve additional exclusions that are baked in their policies. The risk retention group is owned by its policyholders and because of that, no such attempts exist. The risk retention group is not a Wall Street company.
This is where an insurance policy contract language is critical. Hidden meanings and inferences that support non-coverage and confusingly written exclusions, enable carriers and insurance agents to convince you that you have coverage when you really don’t. There is a direct inverse correlation between the selected risk exposure that the insurance carrier accepts in a policy and what you actually perceive to be the case. Moreover, the less risk that the carrier accepts, the more profit the carrier makes.
So talking with an insurance agency that you can trust, like the assurance services agency and the risk retention group personnel, will give you peace of mind because this is where allied health workers come first.
Thank you for listening, and that concludes our podcast for today.