New Model for MedMal

FLORIDA TREND: Your president, Timothy Bone, and CFO, Michael Wallace, co-founded Physicians Preferred, since acquired by Jacksonville-based Florida Doctors Insurance Co., now the state's fourth-largest medical-liability company. How does an upstart compete in the back yard of the largest medical-malpractice insurers in the state, including Florida Doctors and FPIC?

BUTLER BALL: Last year, over 30,000 doctors purchased malpractice insurance in the state, and much of the market is fragmented. There are, in fact, only four Florida domestic stock insurance companies in the state, and we were the first one to be admitted since 2005. We think there is room in the market. Our unique distribution model allows us to be extremely competitive on pricing.

FT: Some of your competitors say agents are important advocates for doctors who can negotiate prices and contracts and keep an eye out for poorly capitalized companies. What is your response?

BB: We have nothing against agents. There are some very fine agencies around the state. I will be the first to tell you that there are cases in which an agent provides valuable services to a physician practice. That being said, we thought there should exist an option for the physicians and practice managers who would prefer to save money by buying directly from the company without having to compensate a broker, both directly through commissions and indirectly through the cost that the carrier incurs by supporting a group of independent agencies. As to the capitalization levels of insurance companies in the state, the Florida Office of Insurance Regulation oversees the industry and very strictly regulates the surplus capital of each company. The requirements and oversight of stock companies are even more stringent than other types of insurance companies. That's why we chose to form a stock company.

FT: How is the market responding?

BB: Even better than we expected. We are tracking to have a very successful first year. I think that the tough economy, the reduction in reimbursements and the uncertainty surrounding the healthcare reform are all contributing positively to our model.