Just How Reliable Are Surplus Lines Companies?

Physician Talking to Patient When discussing medical malpractice insurance, we often use the terms “admitted” and “surplus lines” (non-admitted). Today we will go into more detail about surplus lines insurance companies and what you should know when applying to surplus lines insurance companies.

Some of the reasons why your medical malpractice insurance agent may suggest surplus lines insurance companies are:
1. You are working outside your specialty;
2. You have a lot of claims or licensing issues;
3. Some services are not covered by admitted carriers, such a Medical Director coverage or medical spa services.
If any of these situations apply to you, then surplus lines insurance companies are going to offer you good coverage options.

Why is an insurance company considered surplus lines? Simply put, surplus lines insurance companies do not participate in the state’s Department of Insurance Guarantee Fund and are not highly regulated by the state, the way an admitted insurance company is regulated. The surplus lines insurance companies are licensed to do business in the states they are in, they are just not as highly regulated, as their admitted cousins. This means that surplus lines insurance companies can cover doctors and practices that have been denied by the admitted insurance companies.

While many physicians and practice managers worry that surplus lines insurance companies aren’t regulated by the Department of Insurance Guarantee Fund, they should rest assured that they are getting good coverage. While ideally as a physician you would like to be covered under an admitted policy, it is not the end of the world to be covered by a surplus lines insurance company. Surplus lines insurance companies like Lloyd’s of London, Admiral and Evanston Insurance Company are large, multi-national, well-established insurance companies with billions of dollars in revenue. And, they are typically A-rated companies by AM Best. In short, most of the surplus lines insurance companies are large insurance companies with very deep pockets and excellent claim defense.

That said, there are some of the negatives of being covered by surplus lines insurance companies you should be aware of:
1. The cost of coverage tends to be higher than admitted carriers;
2. The insurance policies are less robust than admitted carriers;
3. You may need to pay extra for the policy to have defense costs outside the limits of the policy;
4. The policy may have a high deductible.

Contact our professional liability agents today if you have additional questions about surplus lines insurance companies.