The role of physician-owned insurance companies in the detection and deterrence of negligence.

This study presents evidence that physician-owned insurance companies and their physician members play an important role in the detection and deterrence of negligent behavior. A survey of physician-owned companies indicates that 94% involve their physicians in one or more aspects of the underwriting process. About 60% involve their members in assessing the competence of physicians who have been sued and in advising the underwriters on decisions concerning both continued insurability and the conditions of insurance. During 1985, a total of 0.66% of the physicians in physician-owned companies had their insurance terminated or were forced to give up their coverage because of negligence-prone behavior. An additional 0.7% of active policyholders were subject to restrictions on practice or other medical sanctions and 1.8% to surcharges and deductibles. Thus, disciplinary actions were in place against 3.2% of insured physicians whose performance was viewed as in some way substandard. The findings indicate that the physician-owned companies are effective agents in identifying negligence-prone behavior, and suggest that these companies also play an important role in deterring substandard performance.