Administrators of the Trust since its inception have been William P. Wallace or Andrew L. Wallace. The current manager of the Trust, Andrew Wallace, is a graduate of Florida State University’s College of Business, with a B.S. in Risk Management and Insurance.
The founder of the Trust was Andrew Wallace’s father, William P. Wallace, who retired in 1992. Andrew Wallace’s grandfather, John Wallace, was also in the insurance business in St. Petersburg.
The basis of insurance is that people pool their resources in the event that one of the persons contributing to the fund will suffer a loss in the future. Insurance was started in the 17th century in England at a coffee house that was run by Edward Lloyd. This coffee house, later known as Lloyds of London, started by writing insurance on ships and their cargo.
Today, insurance may be provided by many different vehicles — an insurance company, insurance mutual, a reciprocal insurer, a mutual company, or a trust. The Trust charges a premium to physicians based on three things:
Additionally, member physicians may choose a form of tail coverage — either a tail that will be provided in the event of death, disability or retirement (after 5 years at any age), or a totally pre-funded tail such that if the doctor leaves the Trust, he or she will have coverage.
Our Trust is able to offer competitively priced insurance to its member physicians due to our underwriting of new members, claims philosophy, and low expenses. The Trust seeks to offer the lowest premium over the long term to all of our members. Part of the reason for the low overhead is there is no middle-man. The Trust is operated by South Pinellas Management Company which sells the policies. Thanks to careful management, the Trust’s expenses have averaged less than 15% of premiums paid. This compares favorably to the average expense factor for an insurance company of over 25%. That means that on average at other insurance companies, only 75% of the funds collected are available for the payment of claims. In the case of the Trust, with expenses of less than 15%, more than 85% of premiums collected are available to pay claims or to be returned to member physicians.
The Trust is structured to self-insure $250,000 for any one patient. Beyond this, limits are offered up to $1-million for each patient, with reinsurance provided by the General Reinsurance Corp, one of the best rated reinsurance companies, with an A++ rating.
Included in the Trusts’ premium is coverage for most Licensing Agency investigations.
The coverage written by the Trust policy is claims-made coverage, which means we can cover things that occurred before you were a member of the Trust, but have not yet been reported to you as a claim. The Trust provides either fully pre-funded tail coverage or the cost is spread evenly over 5 years at the $250,000 per claim and $750,000 aggregate level. The choice is up to the physician or group which they join. Rates on the tail coverage can change, so the cost could increase and will if a claim is paid on a physician’s behalf. Tail coverage above the 250/750 level may be purchased or could be free in the case of death disability or retirement after 5 years of having the excess coverage.
Currently in Florida, many companies, trusts, and associations compete for professional liability insurance. Prices vary constantly for professional liability coverage. Currently, these other companies are aggressively seeking to write professional liability insurance, but, may change their minds as they have in the past and either leave the state or increase the premiums so much as to be unaffordable.
Pure, Local Insurance
The Trust provides the purest form of insurance that there is. There is no need for profit to be built into our rates, as all moneys collected by the fund that are not used in the payment of claims or expenses are returned to member physicians.
The Trust is also intensely local, operated by physicians for physicians in mostly in Pinellas County. While other companies pull in and out of Florida, writing professional liability insurance like they do homeowners insurance, the Trust will be here for physicians as long as the physicians want the Trust to exist for their benefit.
The Trust works very hard at protecting the doctor’s reputation. All claims that are brought against a physician now have to be reported to the Departments of Health, Financial Services, and claims that are settled by payment have to be reported to the National Practitioner Data Bank. All applications for a hospital, HMO or PPO ask physicians whether they have had any claims. There are also firms that publish books listing doctors who have had lawsuits against them. Consequently, the physicians on our board have great empathy for their fellow physicians and will bend over backwards to help in the defense of their fellow physician’s reputation whenever possible.
A Trust, Not a Company
The South Pinellas Medical Trust is not an insurance company and is assessable. There are many reasons, however, why member physicians should not be overly concerned about an assessment, and should value that the Trust is not operated as a company:
If we were a company, the Trust would have to make greater payments to the guaranty fund of the State of Florida. This fund bails out insurance companies with financial problems, such as those that suffered tremendous losses in the hurricane. Additionally we would be under dramatically increased regulation if we were a company. The increased accounting costs alone would increase our expenses tremendously.
The longer a physician belongs to the Trust, the less likely he or she is to be assessed. This is because we apply surpluses in past years to any deficits in later years. Here’s how it works:
Each year, the actuarial firm of Madison Consulting reviews the Trust’s rates to make sure they are adequate to meet anticipated claims. The actuaries take into account our low expense costs and pass these along to member physicians. Additionally, since we are not seeking a profit, we do not need to add in a profit margin.
Members in high classes that have had claims paid on their behalf are surcharged if the claim is large relative to premiums paid in. The surcharge system encourages members to avoid claims and to not stay in the Trust if they have multiple paid claims. Any unpaid claim surcharge is added onto the cost of the $250/$750 tail coverage.