NORCAL Group CEO Scott Diener Discusses National Growth Plans

Last month, the NORCAL Group announced two initiatives in its strategic plan for national growth. First, it began transitioning Texas physicians insured by its subsidiary Medicus Insurance to NORCAL Mutual paper; second, the company purchased the renewal rights to healthcare professionals insured by Pennsylvania Physicians Reciprocal Insurers (PaPRI). Its Pennsylvania subsidiary, PMSLIC, will now begin offering coverage to those 600 physicians.

“To compete in today’s medical professional liability insurance market, it’s necessary to reach a larger audience,” explained Scott Diener, president and chief executive of NORCAL Group. “To reach that audience, to insure a greater number of physicians, we need to spread out geographically. This is—in part—being dictated by the changes going on in the delivery of healthcare.”

NORCAL Mutual was established by California physicians at the height of the first medical professional liability crisis in 1975. The company expanded its coverage into Alaska and Rhode Island before purchasing PMSLIC in 2002 as a means of entering the Pennsylvania marketplace. Nine years later, it acquired the Austin, Texas-headquartered Medicus Insurance Company.

At the time of its addition, Medicus was admitted in 31 states with a direct written premium of $54 million. On a combined basis, the NORCAL Group grew to a direct written premium in excess of $285 million, according to information published by A.M. Best.NORCAL Group Begins Transitioning Medicus Insureds to NORCAL Mutual Paper, Purchases Renewal Rights to Pennsylvania PRI

“Since we began, our mission has been to provide the highest-quality service to our policyholder owners at the lowest responsible cost,” Diener said. “Many of our customers are part of clinics or physician groups in more than one state, so besides building a bigger platform, the Medicus acquisition gave us the opportunity to service a much broader customer base.

“As a mutual insurance company, our first concern is always going to be the interests of our policyholder owners. While the general public likely attributes the changes happening to our healthcare system to the Affordable Care Act, and that certainly has hastened the advancement of change, the changes to the way medicine is practiced have been happening for some time. Physicians had already been creating larger groups to take advantage of economies of scale; likewise, physicians and hospitals had been forming strategic partnerships to take advantage of economies of scale and more effectively deliver care.”

According to Diener, these economies of scale can many times dictate that a physician join a group with clinics in multiple states, requiring a policy with multi-state exposures. Not only did the Medicus acquisition greatly expand the number of states in its geographic footprint, making multi-state coverages possible, it gave NORCAL access to an established network of agents, who Diener says played a significant role in determining Texas as the first state it would transfer to NORCAL Mutual paper.

“Our broker partners helped influence the timing of the transition [from Medicus to NORCAL Mutual paper] in Texas, and they will continue to be influential as we choose which states we want to transition going forward. With their input, we’ve officially decided to start transitioning Illinois to NORCAL Mutual in April, followed by Nevada in May.”

While the acquisition of Medicus was a significant milestone in the NORCAL Group’s strategic plan for national growth, the company is also expanding its market share in Pennsylvania through an agreement with Physicians Reciprocal Managers to purchase the renewal rights of existing PaPRI insureds. Come April 1, PMSLIC will begin offering PaPRI insureds coverage.

“When we became aware that PRI might be interested in transitioning their Pennsylvania book, we reached out to them to express our interest in the opportunity to offer coverage to their 600 Pennsylvania doctors,” said Diener. “We purchased the renewal rights, but just as important, we have the opportunity to work with [PaPRI’s] existing producer network, who know what coverage these physicians carry, what is important to those physicians and when their expiration dates are.

“Once again, this deal makes sense because we are able to offer an increased value to these policyholders. PMSLIC has been serving Pennsylvania medicine for almost 40 years and is an A (Excellent) rated company by A.M. Best, delivering industry leading risk management services. We now have the opportunity to approach 600 physicians in a territory we are extremely familiar with, and we pick up several new agency-partner relationships that we didn’t have before.

“Consistent with our mission, if an opportunity to provide high-quality service at the lowest responsible cost presents itself, we will be interested in it. If the opportunity to acquire means that we can impact the cost structure favorably for our existing insureds and effectively serve new insureds, we are definitely interested in it.”