• Anunciar DOTmed's certificado parte o programa do vendedor: Os compradores qualificados ganham 1% em compras das peças. Estale aqui para mais. 
• sell $
• au sujet de
• My DOTmed 

by Joan Trombetti

Note: This report originally appeared in the August 2008 edition of DOTmed Business News. A list of registered users that provide sales & service can be found at the end.

Insurance may be the least loved of all the business sectors, but insurance companies provide a vital safety net for hospitals, healthcare professionals, and equipment brokers, dealers and servicers alike. Since the insurance pricing can be volatile and fluctuate, DOTmed spoke to several experts to get a snapshot of the market right now. And there seems to be some good news at the moment.

Soft market means competitive pricing

Charles Tice, Producer/Broker, Patterson-McKenna Agency, Inc., (PMA), Wall, NJ, has closely observed the softening market trends of the last several years. "Insurance carriers have been issuing and renewing insurance policies at some of the lowest prices we've seen in the past five years." For one thing, he notes, increased competition has developed from some carriers who are now entertaining certain industries they would have overlooked in the past, including the healthcare industry.

Tice says that the economy has definitely had a real impact on the market. There is a cause and effect from the overall economic rise in prices (gas, food and other costs of doing business), compelling people to look for methods of cutting costs. More people are comparison-shopping for competitive rates. Tice feels that this effect is what leads us into a soft insurance market, where companies are forced to lower their pricing to save or gain business.

Douglas R. Mahon, President, SST Insurance Brokers, Inc., Sonoma, CA, says that the cost of liability and property coverages have remained soft for the last number of years. He states that exceptions to this scenario are wind, flood, and other CAT exposures. "Underwriters are being more careful about writing coverages for areas where these kinds of events are the most likely." says Mahon.

Jack Mann, CEO, GF Mann Insurance, Naperville, IL, also believes that the healthcare insurance market is soft and has been for quite some time. "The soft market is even affecting the pricing for consumable, disposal and durable medical device equipment. It's some of the best pricing we've seen in years," Mann observed.

Although most of the industry experts interviewed did not observe a significant impact due to the many recent weather catastrophes, Daniel McDonough, Vice President, New Science Insurance, a Division of Britton-Gallagher & Associates, Inc., Cleveland, OH, points out one setback in the softening market with these unforeseen disasters. "We are seeing a more cautious trend when it comes to underwriting in the hardest hit areas of both the Ohio and Tennessee Valleys," Says McDonough.

A cycle of insurance payment delays

Another challenge for insurance providers is the struggle some of their insureds are having with timely payment of their premiums. Hospitals are finding it harder to pay their bills for property and casualty (P&C) insurance.

Dirk Glass, President, Advanced Insurance Partners, Inc. (AIP), Wheaton, IL, says, "my property and casualty rate reductions help, but it's not enough to
erase the receivable problems." Glass adds that the current soft P&C market mitigates the situation somewhat. He attributes the market softness to the availability of insurance company capacity compared to last year. "Even physician professional liability/malpractice insurance capacity is up, which is driving rates down 10% to 25%," he says.

Other factors to note: tort law changes in states such as Illinois are encouraging carriers to be more flexible. New players, including Medical Protective, have been assertive in the market, causing others to compete for business they thought they had locked up.

Medical device insurance market not hit as badly

The medical device insurance market is also fairly soft, but not as soft as the traditional property and casualty market. McDonough says that a significant reason for the stronger market is that hospitals are taking larger portions of risk through higher deductibles. They are distributing as much of that risk as they can to manufacturers that do business with them by asking the manufacturers to produce proof of insurance with similar levels of liability that hold the hospital harmless. According to McDonough, medical device distributors are also being asked to share that liability. It's interesting to note that insurance carriers perceive many forces in the healthcare industry to present greater risk, such as pharmaceutical marketing direct-toconsumers. Another example is promotion of off-label uses for drugs in order to maintain market share after patent expiration. Plantiffs' attorneys are looking closely at how companies market their products and are attempting to use those marketing efforts as the foundation for bringing liability suits.

Will the market harden in the near future?

Experts, including Glass, say the following possibilities may contribute to a possible hardening of the market in the future: consolidation, less capacity,
increase in losses, constant decrease in premiums (the lines have to cross sometime, as they did in 2001), and liberal changes in tort laws leading to
class action lawsuits. These forces led to a greater need for coverage protections and demand for insurance. For example, there are attorneys specializing in attracting injured parties to Internet websites regarding Gadolinium/contrast injections by MRI facilities.

While most MRI facilities have excellent loss control techniques to avoid paying on these claims, Glass's clients still need the protection of defense cost coverage liability insurance provides if they are named in a lawsuit and forced to go to court.

Recent major flooding in the Midwest has had little impact on premiums

In the case of a catastrophe, Glass notes that there will be a slight bump in some premiums (property insurance) if a huge loss occurs. The most recent flooding in Illinois, Wisconsin and Missouri has not been a concern to the insurance companies, according to Glass. "I have heard little regarding increases in premiums due to the flooding." He went on to say that a terrorist attack might not cause as much of a problem as it did in 2001 either. "These perils are either not insured, insured and/or reinsured. The reinsurance market is better prepared than in 2001. The government has stepped in when there is lack of insurance, so we as taxpayers end up with some of the tab."

In terms of investment changes, insurance companies invest premium dollars, reducing the overall rates paid. A strong stock market helps insurance companies keep rates down. If the downward stock market spiral continues into 2009, the poor performance will have an upward effect on next year's premiums, Glass predicts.

How can healthcare providers best protect themselves?

Glass believes that hospitals, clinics, nursing homes and other healthcare providers should implement a risk management program. Risk management techniques protect the healthcare provider's assets through options such as transferring risk to others, managing past claims, avoiding future claims through lost control and safety techniques, and by retaining a portion of the risk through a deductible.

McDonough suggests one of the best ways to save on insurance costs is by taking protective measures. Insurance companies may give discounts for evidence that there is an organization-wide mindset toward patient/product safety. A good broker with expertise in this area can offer value-added services such as loss control and risk mitigation programs to improve a client's product liability defenses and lower their premiums. McDonough points out that underwriters will always charge more if they don't completely understand a risk or if there is subjectivity in their opinion of a company's potential risk. The insured should be matched with a carrier that has the most sympathetic appetite for a given risk, so that the intrinsic risk is recognized and evaluated fairly.

ISOs need insurance too

In addition to solid P&C coverage for your main place of business, Mann says that if you go on-site to repair, maintain, or refurbish medical equipment, you should have Products/Completed Operations Liability insurance. This insurance product covers bodily injury or property damage from equipment you or your employees serviced or sold.

For instance, if you do a PM on an MRI, miss a defect in the cooling system, and something goes wrong with the machine that causes bodily injury, or property is damaged, you can be sued.

Another reason to consider this coverage is that it can make you more "saleable" to both new and existing customers. If a hospital knows you have Products/Completed Liability coverage, then they know there's an insurance company behind you.

If you plan to hire a company to do technical or engineering work for you, such as an installation or deinstallation, ask to see their Products/ Completed Operations Certificate of Insurance before using them. Also, be sure to have them name you as an Additional Insured under that policy. That way if a claim is made against you because of work they did, their insurance company will defend you, and your insurance company can be kept out of the loop.

Most used equipment dealers don't think about Product Liability insurance, but it isn't just for OEMs. While Products/ Complete Operations Liability will cover most of the work you or your engineers perform on equipment, if you remanufacture equipment, or do a thorough job refurbishing, the OEM may be off the product liability hook and you may be on it. You should definitely talk to your insurance agent about this coverage.

A third risk that is often overlooked is the risk of damage during transportation. Tice says that equipment dealers and brokers face liability from the end-user, and from transportation risk, and need to consider the latter thoroughly. "What most sellers don't understand is that from the time a buyer purchases a piece of equipment from you, you are now responsible to deliver it in working condition," he says. "Most people rely on the common carrier's shipping insurance, which is priced into the freight fees, to cover the exposure, but they really should be insuring this exposure on their own - it's typically referred to as an Inland Marine Policy." Tice explained why it makes sense. "Say you're a broker or dealer, and you buy a CT that's installed and working, and sell it to an imaging center. Suppose when that machine gets installed at the imaging center it doesn't work - something was damaged during transit, and the buyer sues you. If you have an Inland Marine policy, your
broker will get that claim paid for you. Without that policy, you have to go after the carrier's insurance company on your own, and that's a big headache," Tice added. "If you buy and sell equipment regularly, this type of coverage is worth looking into."

Tice also says the premium on this type of a policy to cover property in transit is not as expensive as most think.

Contributors to this Report:

Charles Tice, Producer/Broker
Patterson-McKenna Agency, Inc. (PMA)
1715 Highway 34 P.O. Box 1429, Wall, NJ 07719
Phone: 732-919-0200

Douglas R. Mahon, President
SST Insurance Brokers, Inc.
PO Box 1489, Sonoma, CA 95476
Phone: 707-996-1232 ext. 11

Jack Mann, CEO
GF Mann Insurance
940 E Diehl Road # 110, Naperville, IL 60563
Phone: 630-420-7700

Daniel McDonough, Vice President
New Science Insurance, a Division of
Britton-Gallagher & Associates, Inc.
6240 SOM Center Road, Cleveland, OH 44139-2985
Phone: 440-264-1326

Dirk Glass, President
Advanced Insurance Partners, Inc. (AIP)
1616 E. Roosevelt Rd Ste. 1, Wheaton, IL 60187
Phone: 630-462-7008