We’ve touched on what to do when your RRG faces liquidation, but it seems this subject matter is still trending, because another Risk Retention Group (RRG) has just announced that they’re facing liquidation. As of 8/31/17 Fairway Physicians Insurance doesn’t have any active policyholders. The Fairway Board of Directors released a statement announcing they have been working with outside parties, while in communication with District of Columbia Insurance, Securities & Banking (DISB) to resolve cash flow issues. The carrier has been operating under a non-disclosure agreement and was not able to share the update their status until recently.
We have had so many questions about RRGs since the Oceanus Receivership, we’ve come up with 10 reasons to reconsider RRGs. Let’s reveal just how thinly capitalized these organizations typically are and how risky their overall profile is.
10. Not all Hospitals Accept Coverage from RRGs
If you have coverage through an RRG, you will need to inquire with the hospitals at which they have privileges whether or not it will accept coverage from an RRG. Many hospitals around the country will not accept coverage provided by an RRG.
9. RRGs Are Typically Established At Hard Market Peaks
Risk Retention Groups may provide a non-traditional alternative when med-mal premiums are very high but as the market softens premiums come down.
8. Risk Pooling
RRG’s facilitate coverage via risk pooling, or spreading the financial risks among a large number of contributors with similar exposures which means if a major claim comes in for another physician your premium will be affected.
7. The Number of RRG Failure is Expansive
Not counting Fairway and Oceanus, many RRGs have failed in the past. As high as 70%. Is your RRG next?
6. Financial Stability
At the end of the day, medical malpractice coverage is there to protect your business and livelihood. You get what you pay for, and paying less now for a potentially major financial loss is not something you want to sign up for. With insolvency on the periphery wouldn’t you like to protect your practice?
5. Occurrence Form Unavailable
Traditionally you have the choice between a claims-made or occurrence forms when choosing your policy types. Typically, Occurrence is not available with an RRG. For this reason RRG premium quotes will appear to be a fraction of premiums due to the fact that RRGs are not comparing the same exact coverage options. Don’t let the price of Claims Made entice you when you have the opportunity of free “Tail” coverage under Occurrence (a savings worth considering).
4. Hidden Fees
RRG insurance may require additional fees. By law, RRGs must be owned by their insureds and most require insureds to make a capital contribution for several years, in addition to their annual insurance premiums. This money is at risk and its return is not guaranteed.
3. Ineligibility for State Insolvency Protection Funds
In some states RRGs are not eligible for protection by the statewide Property/Casualty Insurance Security Funds in the event of their insolvency. Which means, your RRGs, if not licensed by your state, expose their policyholders to no protection by the state which in some circumstances is a $1 million per claim guaranty fund in the event the RRG becomes insolvent.
2. May Only Write Professional Liability
Did you know that many RRGs are only allowed to write professional liability insurance? This means that they may not write property insurance, including collision and comprehensive coverage for autos, or workers compensation insurance.
1. Cancellation Stipulations
Some RRGs only allow you to cancel during certain windows of time without a penalty or forfeiture of benefits. This is inconvenient when you are unhappy with your coverage or simply seeking better coverage.
Ultimately, if you don’t want to risk your business or personal assets you probably should reconsider RRGs!
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