As a healthcare provider, medical malpractice insurance is essential for your business operations and your peace of mind. But if your insurance policy isn’t the right fit for your practice, you could end up spending more than you need to, or worse, be left without enough coverage in the event of a lawsuit.
By conducting an annual insurance audit, you can make sure your policy is still the right fit. If your current coverage no longer fits your needs, this is an opportunity to make changes to your policy or even switch to a new insurance provider.
Let’s break down why insurance audits are important and how to conduct one for your practice. Insurance audits may sound stressful, but with the right preparation, the process can be straightforward.
An insurance audit is the process of reviewing an existing insurance policy to make sure it provides adequate coverage for your business. The word 'audit' in this context refers to the insurance premium audit process, which involves reviewing your policy and business operations to ensure your premiums accurately reflect your actual exposures. It involves reviewing your current policy details as well as your business operations and general risk level. This process is also sometimes called an “insurance premium audit”.
Regular insurance audits are essential for medical professionals because the reliability of your coverage could directly affect your career. It is important to prepare for the audit by organizing and maintaining accurate documentation to ensure a smooth process. However, anyone can conduct an insurance audit, meaning you can review any type of policy you have. For example, a small business might conduct an annual audit of their general liability insurance.
At the beginning of the policy period, estimates are used to set your premiums, and the audit is performed later to verify the accuracy of those estimates.
An insurance audit can be performed by your insurance company, an independent auditor, or even by yourself if you are reviewing your own records.
There are a few different ways to conduct an insurance audit. The first is to conduct a detailed review of your policy on your own and make sure it’s the right fit for your business. In the rest of this article, we will be discussing this type of personal insurance audit.
However, there are also many types of third-party insurance audits. For example, some insurance companies will conduct their own audits for long-term policyholders. These are similar to an IRS audit in that the insurance company will review your daily operations, tax returns, payroll records, and other financial documents from the prior year. Auditors require access to your financial and operational records, including general ledgers and books of account, to ensure all information is accurate and complete.
They do this to evaluate your risk exposure and make sure it aligns with the premium you’re paying. Typically, businesses provide estimates of payroll and expenses at the beginning of the policy period, and these estimates are later verified during the audit process to determine actual exposures and make any necessary premium adjustments.
This type of insurance premium audit is more common for businesses with general liability coverage or workers compensation policies than it is for medical malpractice. In this situation, the audit process is required to maintain coverage, and you could end up paying hefty surcharges if you fail to complete it.
When you sign up for a new malpractice insurance policy, ask your carrier if they conduct third-party audits and what to expect from the process. This way, you’ll be prepared if a premium auditor shows up at your practice.
Even if your insurance provider conducts their own annual audits, you should also take the time to complete your own policy review. Third party audits focus entirely on the insurer’s risk level, but a personal audit helps you decide whether the policy is right for you and your business. You don’t need to hire professional insurance audit services to do this—you can assess your policy on your own.
Insurance is a significant but essential expense for medical professionals. It covers your defense and settlement costs if you are involved in a medical malpractice lawsuit. These lawsuits are more common than you might think: 31% of medical professionals have been sued at some point in their careers.
Because medical malpractice coverage is so vital to your career, it’s important to make sure your policy is the right fit for your business. Malpractice insurance renews annually, and your coverage needs may change from year to year.
Conducting an annual insurance premium audit ensures that you’re aware of any policy changes or premium increases. The audit compares the estimated exposures, such as payroll and classifications, provided at the beginning of the policy with your actual exposures, including actual payroll, revenue, and sales figures. Maintaining accurate records is crucial for a smooth audit process and correct premium calculation. During the audit, the insurer reviews the actual numbers to determine the final premium amount.
If there is a difference between the estimated and actual premium, you may receive a refund for overpayment or owe an additional amount if you underpaid. It gives you time to make changes to your coverage before the next policy period starts. Ignoring an insurance audit could leave you stuck with a policy that is too expensive, or worse, doesn’t provide enough coverage in the event of a lawsuit.
The best time to conduct an insurance audit is when you receive your renewal notice from your insurance provider. This usually happens 30 to 90 days before the policy expires. If you already know you want to switch policies, it can help to get started even earlier.
It can also be helpful to conduct an insurance audit after cancellation or retirement. This is because malpractice claims can still come up after the policy expires, and you'll want to understand what your insurance does and doesn't cover.
So you're ready to review your malpractice insurance policy---here's a step-by-step breakdown of how to audit your insurance premium and make changes if necessary.
Start the premium audit process by reading both your current insurance policy and next year's insurance policy in full. Most insurance providers will send you the new policy 30 to 90 days before your current policy term ends, so you'll have plenty of time to read it, make adjustments, or switch to a new provider.
Make sure that all of the information on your new policy is correct and reflects any changes you made to your business during the year. For example, if your practice moved to a new location, check to make sure your address is correct.
Many medical malpractice policies are designed to cover all employees at a specific practice. If you hired new employees or independent contractors throughout the year, you may need to add them to your policy.
As you conduct your review, note any changes between your current and future insurance policies. Your insurer may change your estimated premium cost, reporting period, or coverage limits based on their updated risk assessment.
Once you've identified changes in your insurance coverage, consider how they will affect your business, both financially and legally. In many cases, changes are minimal, but a significant premium increase or change to your coverage may warrant shopping around for a new policy.
There are several policy components to review as part of any malpractice insurance audit. Even if these components are staying the same next year, you'll still want to make sure they align with your business needs.
Here are the most important factors to review as part of your malpractice business insurance audit.
Keep in mind that the insurance coverage that worked for your practice in the past may no longer be the right fit for your business. For example, if your budget has tightened over the last year, you may need to find a lower-premium policy.
Alternatively, if there has been an increase in lawsuits targeting your specialty, you might want more robust coverage, even if it comes with an additional premium increase.
After reviewing your policy and assessing your audit results, you may have some questions. Get in touch with your insurance provider as soon as possible to get these questions and concerns cleared up. They can clarify the reasoning behind price increases and other policy changes so you can make an informed decision.
If completing the audit demonstrates your malpractice insurance is no longer a good fit for your business, it might be time to find a new policy and/or provider. Start by talking with your current insurance provider, they may be able to adjust your policy to better fit your needs.
If your current provider's offerings still don't align with your needs, the next step is to compare offerings from different providers. Have an insurance agent look at several different policy types before making a final decision based on estimates from several companies. The insurance industry evolves over time, so there might be new coverage options that weren't there in previous years.
When you're insurance auditing for your malpractice policy, there are a few key clauses and policy components to be aware of. As your insurance needs change, you may need to adjust these provisions to get the coverage you want. Here's what to look at during your next insurance audit.
Claims-made and occurrence are the two primary types of professional liability policies. Occurrence policies offer lifetime coverage for incidents that occur during the policy period, regardless of when the policyholder files the claim. Claims-made policies cover claims made during the policy period, even if the incident occurred earlier.
Claims-made policies are more common in malpractice insurance, and they're cheaper than occurrence policies too. However, you'll need to be very aware of the policy dates and purchase tail coverage to avoid gaps in protection.
Occurrence policies are simple and straightforward: if an incident happens when the policy is active, you'll be covered, no matter when it's reported. However, they are more expensive than claims-made policies, and not every insurance provider offers them.
Tail coverage extends coverage for medical malpractice claims reported after a claims-made policy expires. It's crucial for physicians who are moving, transitioning to new specialties, or retiring to avoid gaps in coverage.
Tail coverage can be expensive, and is sometimes limited by the original policy conditions. However, it's usually worth purchasing, as many malpractice claims aren't reported until several years after the incident happens.
This is a clause in a medical malpractice insurance policy that requires the insurer to get the physician's written consent before settling a claim. This is important because settlements can hurt your career and reputation. This can happen even if you are not found negligent.
A pro of having a pure consent to settle clause is that it gives you ultimate control over the decision of whether or not to settle a claim. This allows you to protect your reputation by fighting claims you believe are unfounded without the risk of your insurer seeking to settle your case purely for economic reasons.
A con is that it can be more expensive for the insurer, who may prefer to settle claims early to avoid legal fees. Because of this, policies with pure consent to settle clauses often have higher monthly premiums.
Prior acts coverage, also known as nose coverage, is an optional feature in medical malpractice insurance. It protects doctors against claims arising from incidents that occurred before their current policy's effective date, up to a certain retroactive date. This is especially important when switching insurance carriers or making career transitions.
Prior acts coverage is often more affordable than tail coverage, making it a more easily accessible way to prevent gaps in protection. However, not all insurers offer prior acts coverage, and those that do often have significant underwriting restrictions.
In insurance, a premium audit is when you review your insurance policy to make sure it aligns with your needs. Some insurance providers also require third-party audits, which is when an external team reviews your business operations and financial records to assess your risk and make sure you're paying the right amount.
The best time to conduct an insurance audit is one to three months before your policy ends. At this point, you should have your policy renewal options available, so you can compare current and future policy options.
No, personal insurance audits aren't required, but they're helpful to make sure you have the right malpractice coverage for your needs.
Some other types of insurance may require annual third-party audits to maintain coverage. For example, many other types of small businesses need to conduct a general liability insurance audit and workers comp audit every year.
No, you don't need to spend money on professional insurance auditing companies. You can review your policy on your own each year and work directly with your insurance provider to make any adjustments. If your insurance provider requires a third-party audit, they will arrange the audit and let you know in advance.
Reliable medical malpractice insurance is a must for any healthcare professional, no matter your specialty. Indigo offers robust malpractice insurance policies tailored to your needs.
Indigo's innovative AI-powered quoting process assesses your unique risk level to provide fair pricing. Plus, we offer benefits like risk management support, free retirement tail coverage, and proactive incident trigger coverage.
Get a quote today to see how Indigo can support your practice.
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