Why are MedSpa Insurance Premiums on the Rise?

Your “Strategy for Protection” in Times of Uncertainty

As we all continue to experience COVID-19 together and how it has a major impact on our industry, businesses, patients and communities, it certainly shifted all the major insurance providers’ receptiveness to our clients.  Rather than connecting with us and our clients about how we may help each other, they have gone into survival mode. Let us help you navigate your way through the turbulence by helping you with your renewal strategy!

STRATEGY BASIC:

What Type of Liability Insurance is Available for MedSpa & Wellness Center Owners & Providers?

The type of insurance you buy for your med spa is referred to as “surplus lines” insurance.  This means when your application with standard medical practice coverage insurance companies gets declined or offer terms that will exclude all or part the liability coverage for what you are providing to your patients. Then you default to “surplus lines.”

Surplus lines insurance is a specialized coverage available from certain insurers because of the following reasons:

1. MedSpa & Wellness Center business models differ greatly from the traditional medical practices and are unique on to their own, no practice is truly the same and there are hundreds of thousands of striving practices nationwide
2. Many procedures such as hormone replacement therapy (HRT) & IV Nutrition are non-FDA approved procedures that are excluded in traditional coverage, however, accepted and covered with a surplus line insurance product
3. Non-medically licensed individuals employing or contracting medically licensed individuals requiring complex coverage for the business, the business owner, and the medical practitioner is acceptable in a surplus line product.

What are the DISADVANTAGES and ADVANTAGES of Surplus Lines Products?

Surplus lines insurance is a specialized coverage available from certain insurers not licensed in your state but eligible to do business in your state as a surplus lines carrier. Because they are not licensed in your state, these carriers are not subject to regulation of rate or form, giving them the ability to fit unique situations & circumstances, and charge whatever they want to adjust to the situation. The advantages are financial strength, the flexibility and ability to manuscript, or customize your coverage to adapt. The disadvantage is the vulnerability to rate increases and adding on coverage exclusions.

Why are MedSpa Premiums on the Rise?

Surplus lines insurers that are covering MedSpas are now adjusting their premiums to compensate for the following:

1. Compensate for Claim Losses – Medical malpractice cases in general are reportedly up 50% over the past 10 years.
2. Rising “Social Inflation Cost” – Defined by a combination of a variety of unforeseen events like COVID 19, riots, business interruption.
3. Other Associated Risks – New products, new procedures, increase in virtual practices, less restrictions now for non-physician healthcare providers, etc.
4. Property and casualty rates – They rise and fall in a market driven cycle and surplus lines insurance is becoming more expensive due to all these factors that are not within our direct control.

During this time of uncertainty, what can I do for my business?

It’s time to work with your insurance agent to develop a long term “renewal strategy” and learn how the hard market industry challenges are impacting you.

If you have an existing policy and just received your renewal quote and there is an increase, don’t assume it’s just your carrier.

The rising increase in market prices is causing a flood of submissions into underwriting. Their priority is their existing clients and first-time coverage, so the likelihood you can get a quick alternative quote from another agent in a tight time frame is minimal.

First Time Insurance Policy Buyer:

If you don’t have an existing policy, and applying for the first time, your agent or broker will send your application to ALL the available markets who write coverage for what you do. This means you get the best deal for the prevailing conditions to start with. In many cases, you may only get 2-3 quotes. This improves over time as you become a known quantity and markets are more inclined to be aggressive on known risks then start-ups. If you are interested in learning more, schedule a free consultation with a specialized WMPG agent today.

Policy “Tips & Tricks of the trade” to help you NAVIGATE:

• Property and Casualty premiums historically go up and down in a cycle. Realize that you are in the upward pricing cycle for the next 18-24 months as the cycle rebounds.
• Work through the cycle and realize there are only a handful of “surplus lines” companies who will cover what you do.
• Work with your existing agent to have a renewal strategy. Its always better to stay with one market through the ups and downs, as opposed to shopping it and moving it every year. Over the long run, it will average out and sticking with one carrier builds loyalty when it comes to handling a claim.
• Understand the nature of the “claims-made” type of policy and the “step rate” pricing. As your agent to explain this to you in detail.
• Agents can provide “premium financing” that would help spread out the payments, typically 20% down and 10 monthly payments at APR’s @ 10%.

We know these are very difficult times and we are in this together. At WMPG, it’s business as “unusual”. If you have any questions, we are here for you. Contact us by phone, email, or schedule a consult.

Author: Ed Kuhn, Co-founder & Licensed Agent