The cost of a dental malpractice policy can vary greatly depending on a number of factors that often seem like a mystery. Here’s a peek behind the curtain at how your premium is determined. Spoiler alert – there’s no wizard pulling numbers out of thin air. Remember that statistics course that you suffered through as an undergrad? That’s how malpractice insurance rates are calculated. It’s all math and statistics.
Why is the Cost of the Same Malpractice Insurance Policy Different in Different States?
When a dentist moves across state lines, they are often surprised to find that the cost of their malpractice insurance changes. Sometimes, dramatically. Here’s why. It has to do with the legal climate in that particular state. The legal climate contributes to the likelihood of a large claim settlement. And the likelihood of a large claim settlement contributes to the premiums charged in that state.
The vast majority of dental malpractice insurance lawsuits are civil suits, not criminal suits. Therefore the laws and code of conduct are determined by each state, as well as the state dental board, and they can vary widely across the country. Things like the statute of limitations, the ability to use legal precedent, and the option of having a jury rather than a judge all affect the legal climate. In addition, certain large metropolitan areas have more lawsuits than other areas, simply due to population. All of these factors are taken into consideration by insurance companies when determining their rates. We live in a era of big data. There is more data now than ever before. Insurance companies have access to decades of very specific claim data that can show them claim trends in every state, every county and in larger cities. Insurance companies employ actuaries who are the math and statistics wizards. They use this data to determine if the current premiums are sufficient to cover future losses. And if not, they can extrapolate the data to determine what future rates should be.
Why Do Malpractice Insurance Rates Vary Between Insurance Companies?
Insurance companies are allowed to use their own actuarial data to determine their insurance premium rates, with certain parameters. For example, Insurance Company A may determine that there is a trend in claims arising out of the surgical placement of implants. So Company A increases their rates, but only for dentists who are performing surgical placement of implants. Insurance Company B may not realize this claim trend as quickly and they don’t adjust their rates early enough. When they do realize that they are paying out a lot in claims resulting from surgical placement of implants, they take a rate increase across the board on all their policies to try and bring their premiums and losses back into balance.
However, there are checks and balances to this system. Each state has an insurance commissioner. The state insurance commissioner has to approve the rates before they go into effect. This helps to keep all the premiums charged by various insurance companies within a certain range, within that state. Rates are allowed to vary from company to company but only within specific parameters set by the state.
Why Do Malpractice Insurance Premiums Vary Based On the Procedures You Perform?
In a nutshell, some procedures are riskier than others. And some procedures have a higher statistical likelihood of adverse results that could result in a claim. Let’s face it. Surgically placing an implant is riskier than filling a cavity. Based on statistical data gathered over decades, insurance companies have determined which procedures are the most likely to result in claims, and they price them accordingly.
Why Is the Cost of Malpractice Insurance Cheaper For New Graduates Than For More Experienced Dentists?
Generally, it takes time for a malpractice insurance claim to develop. In many cases, the claim itself isn’t filed against a dentist until a year or more after the procedure was actually performed. From a statistical perspective, dentists are more likely to experience claims later in their career simply because the claim needs time to develop. An implant doesn’t fail in a day. It may fail a year or two years from the day it was placed….resulting in a claim down the road. The statistical odds of a brand new graduate having a claim filed against them during their first year in practice are very low.
Do you have more questions about malpractice insurance costs? We LOVE to talk about malpractice insurance – and we’d love to answer your questions! Talk to someone who specializes in dental malpractice insurance!