FAQs: The Lowdown on Malpractice Premium Rates

1.  How are premium rates determined for malpractice insurance in a specific practice area?

Premiums are determined by an actuarial analysis of the claims experience in the area that you practice.  Areas that are very litigious, such as the NYC Boroughs, generally have higher premiums while a less litigious area usually have lower premiums.  Many companies do a thorough actuarial analysis of rates every three years and adjust rates based on claims experience in a specific area.  Profits generated by most insurance companies go the companies’ stockholders.  Unlike those companies, AAOIC returns profits to its insureds through a premium credit which has the effect of lowering the overall premium for an insured.

2.  I see my malpractice insurance premium increased a lot compared to last year.  What happened in just one year to cause the increase?

As mentioned above, premiums are determined by the claims experience in your practice location.  Insurance companies employ actuaries to analyze the loss data.  Insurance regulators require adequate reserves for current and potential future claims.  So, insurance companies must charge enough premiums to cover loss and reserves for a specific area.  Many companies are reluctant to raise rates until the claims experience in that area require it, so you might see a “jump” in the rates as the company makes the necessary adjustment in rates.  For example, AAOIC recently had to significantly raise the rates in the NYC Boroughs due to a continued increase in loss experience.  Additionally, there has been significant “medical inflation” in malpractice judgements the last few years in most areas of the country with the result that the malpractice insurance market and reinsurance market is “hardening”, which means less availability and higher rates through-out the industry.

3.  Does where I practice affect my malpractice insurance premium rate?

Yes, it does.  If you have more than one practice location, insurance companies will generally charge the premium rate based on the practice location with the worst claims experience.  There are areas in the country where the rates are very low and a few areas where the rates are very high.

4.  Is there anything I can do to lower my insurance rates?

It is the practice location that affects your insurance rates, so where you choose to live and practice is the determining factor for rates. .  However, you can reduce the chances of being sued as well as reducing the chances of a judgement against you by taking Risk Management classes.  AAOIC provides risk management through lectures at the AAO Annual session, State Orthodontic Societies and Risk Management articles on our website (aaoic.com).  There is a free Risk Management video available on the AAO Distance Learning library.  We have statistics that show a 25% risk reduction for those that have taken one of our Risk Management courses within the last 2 years.  If you take a Risk Management class at the AAO Annual session or view the video on the AAO Distance Learning library and take the test, you will receive a 2-year 10% reduction of your insurance premium.