Policyholder Services

Know Your Policy

By Robert Widi, OMIC Assistant Underwriting Manager

Digest, Summer 1998

Let’s face it, reading an insurance policy isn’t very exciting. It’s important, however, to understand how to read your policy so you can perform an educated review of our coverage. Fortunately, most professional liability policies are organized in a fairly similar fashion and really are not so intimidating once you take a closer look.

An insurance policy normally consists of two documents: a policy booklet including a detailed description of the coverage provided by the company and a declarations page naming the specific policyholder, the dates of coverage and the liability limits chosen. A policy booklet is not valid unless a current declarations page has been issued and is in force.

Managed care contracts and hospital credentialing forms often ask you to indicate the type of policy you have. There are three common forms of insurance policies: claims-made, claims-paid, and occurrence. Generally, the policy type is stated on the cover of the booklet or in the introduction. A description of how that specific type of policy works is usually provided in the first few pages of the booklet. OMIC issues only claims-made professional liability policies.

The definitions section of your policy booklet describes the meaning and intent of common terms used throughout the policy. Usually these words will appear in bold type. Although many insurance terms are common within the industry, it is important to read this section carefully to understand your carrier’s interpretation of a term or phrase. These definitions can sometimes change or affect the context of subsequent policy conditions or clauses.

The insuring agreement states the intent of the agreement between the company and the policyholder. This section will define who an insured is (including whether coverage extends to the actions of non-physician employees), the types of activities and services covered, and the conditions under which the company will agree to pay indemnity and/or defense costs on behalf of the insured. OMIC’s policy, for instance, includes coverage for most ancillary personnel at no additional charge. (Optometrists and nurse anesthetists may be included through endorsement for an additional premium.) OMIC’s policy also pays defense costs in full (not included within the liability limits) and includes valuable supplementary payment benefits and conditional defense coverages.

Exclusions are activities or services for which no defense, supplementary payments or indemnity payments are available under the policy. It is generally thought that for the insureds, the fewer exclusions the better, but this can be misleading. For example, some carriers will exclude certain activities in order to strengthen the underwriting of higher exposure or experimental procedures. This type of exclusion can actually have a stabilizing effect on a carrier’s premiums since the increase in exposure is addressed through careful underwriting and risk management rather than through increased rates or surcharges. OMIC’s excellent refractive experience is a good example of this philosophy. Although coverage is initially excluded, it is easily added back through endorsement without additional charge following a special underwriting review. As a result, OMIC’s claims experiences has been much better than the rest of the industry, and our rates have remained stable for more than ten years. In short, a good rule of thumb is that exclusions should be reasonable limitations that either benefit the insured or do not unduly limit the insured’s scope of coverage.

Your policy should explain the general conditions and rules you and the company must follow for the policy to be valid and how the policy will respond if an incident occurs or a claims is made against you. You should be ware of whether your policy covers your right to appeal court decisions and whether the company has the right to settle claims without your consent. As a general rule, under OMIC’s policy, the insured is asked to give consent before the company settles a claim on his or her behalf.

Other important things to look for include the responsibility of each party when first reporting an incident and procedures regarding termination, cancellation or non-renewal of the policy. Details regarding the purchase of extended reporting period “tail” coverage (if the policy is claims-made) as well as any vesting or age requirements for the waiver of the premium stated clearly. For instance, many carriers will require that you reach a specific age and be insureds for a certain number of years (usually five or more) before granting a free tail at retirement. OMIC has no age requirement and policyholders can receive a free retirement tail after at least one year (see note below).

As you evaluate your insurance policy, don’t be afraid to ask questions when things are unclear. Whether you are currently an OMIC insured or taking a closer look at us for the first time, OMIC’s underwriting representatives are available to help you become more educated about your coverage. Please contact us at (800) 562-6642, extension 639 or omic@omic.com.

UPDATED (1/13/2013):  OMIC’s retirement premium waiver was modified in 2003 to increase the required minimum period of continuous insurance from 1 year to 5 years for all new policies incepted on or after 6/1/2003 and for all individual insureds added to existing group policies on or after 6/1/2003.

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Six reasons OMIC is the best choice for ophthalmologists in America.

#1. Consistent return of premium.

Publicly-traded insurance companies exist to make profits for shareholders while physician-owned carriers often return profits to their policyholders. Don’t underestimate this benefit; it can add up to tens of thousands of dollars over the course of your career. OMIC has one of the most generous dividend programs for ophthalmologists and has returned more than $20 Million to our members through dividends.