Insurance executive Dennis Santoli says HME providers should choose policies more wisely and enhance their risk management programs.

What is happening with HME provider insurance these days? With stable rates, less litigation, and tort reform in the works, the outlook is positive. Dennis Santoli, president and CEO of The Campania Group, Vienna, Va, gave us an overview of the insurance industry along with some advice for providers.

Dealer/Provider:In the past, Dealer/Provider has covered the liability threat of continuing to sell products that have been the target of successful lawsuits. Are there presently products such as these that providers should be aware of?

Dennis Santoli: In terms of class action suits, there is nothing from the DME side that is particularly troublesome. There are no products where there is an inherently dangerous problem.

D/P: Are insurance rates heading up or down? Why?

Santoli: The answer varies depending on which kind of insurance. For liability insurance, the prices will continue to be stable. With property insurance, we are going to see increases and this is not because of the HME industry, but rather factors like weather. I anticipate a 20% to 30% pricing increase on property insurance, especially in Florida, California, the Midwest, and probably New England. There may be geographic pockets where we won’t see increases. ... As for workers’ comp and auto insurance, I believe rates will stay fairly stable.  

D/P: What is the best thing that HME providers can do to lower their insurance premiums?

Santoli: First, make sure you buy only coverage that is necessary; do not buy more than you absolutely need. A small dealer probably does not need a million-dollar policy, but maybe a $300,000 or $500,000 policy. That could make as much as a 20% to 40% difference. In addition, providers should make sure that they accurately report the types of products they sell, rent, or service. A provider who installs lifts will pay a much higher rate than someone who sells wheelchairs.

On the workers’ compensation side, a small HME dealer may not actually have to buy this insurance because in many states owners of very small businesses are exempt. … Finally, on the auto insurance side, it is important to properly categorize what you do. For example, there is a big difference in premiums for a business with drivers who make a lot of stops versus a specialist company that makes 10 stops a day. It is important to have an insurance agent or broker who can distinguish the type of activity.

D/P: How does accreditation affect the types of insurance a provider can get and which rates he can receive?

Santoli: Accreditation has no impact on workers’ compensation or automotive insurance. When it comes to liability, accreditation can mean you are perceived to be a better risk. That fact can mean a 5% to 10% discount.

D/P: Will the likely event of nationwide competitive bidding affect insurance coverage? If so, how?

Santoli: I’m not sure if anyone has the answer to that. It depends on what happens with unit pricing. A lot of policies are based on revenues. If revenues get driven down, but you’re delivering the same level of service, we could see an increase. If underwriters reevaluate, we could see an increase on a unit basis.

D/P: What is the current state of tort reform? If you could wave a magic wand, what tort reform measures would you put in place?

Santoli: There is a lot happening in tort reform, but not at the federal level—at the state level. Some states are very progressive. From the dealer’s perspective, I think elimination of joint liability is important. If you have a product that you install and the product is defective, both the manufacturer and the dealer get sued. Even if the manufacturer is 99% responsible, the dealer still shares the burden 50%.

Some states right now are trying to change this and to allocate liability based on comparative negligence. In addition, some states are trying to push through a reform that says if a product is FDA-approved, you can’t go after the retailer. … Slowly but surely, these changes are coming through and it is helping the industry.

D/P: How would you rate the litigation risk in general for providers?

Santoli: Litigation is much lower than in other comparable industries. Right now, we are seeing the biggest percentage of claims on high-risk things like elevators, lifts, and controlled devices. User error claims are when someone just is not handling the product properly and they’re looking for someone to blame. The ultimate example is someone smoking while on oxygen—then they sue because they burned their face. ... But all in all, I’d say the frequency of claims has stabilized—or even come down—over the past 4 or 5 years.

D/P: Do you use reinsurers to relieve some of the price pressures responsible for high premiums? What are the pros and cons of using reinsurers?

Santoli: Yes, we use reinsurers. Most insurance companies do not keep 100% of the risk. We lay off about 75% of risk to other companies with more capital and resources to support us. It is standard practice in the industry, and there is no impact on the pricing of products. If there were no reinsurance available, it would be a big problem. Smaller companies could write only a much lower amount of risk. Reinsurance needs to be there for the industry to stay healthy.  

D/P: Among HME providers, what is the most common misconception about insurance?

Santoli: That they get no benefit from it! No one appreciates insurance until they really need it. You need it—otherwise you are vulnerable. That being said, I go back to what I said earlier—you’re supposed to have it, but you don’t need too much of it. A small company does not need a million-dollar policy.

D/P: How would you characterize the current health of the insurance market today?

Santoli: Right now, there is a lot of capital in the market. With major catastrophes, starting in 2001, prices got driven up and it attracts investors. There is more insurance available today than in the past 7 to 10 years. But eventually, there will be too much capital and prices will go down. It is like a roller coaster. Right now, it’s becoming a buyer’s market. Our company hasn’t raised rates in the last 3 years.

D/P: What is the most important thing that providers can do to enhance their risk management program?

Santoli: Accuracy and timeliness of information is key. Keeping good records is important. Also, training and certification of employees can help because it makes you a lower risk with less potential for ignorant losses to occur.

D/P: What is the most common problem you are seeing as you discuss insurance coverage with providers?

Santoli: A lot of providers have the wrong kind of insurance. They buy a policy based on price or due to a personal relationship.  For example, business owner’s policies are popular, but often they’re not right for the provider. They exclude coverage for property that’s off premises, yet premises coverage is really not where the big exposure is for providers. They really need the off premises coverage. In addition, a lot of standard policies also exclude rental products. Clearly, it’s important for providers to have a policy that covers rentals.

D/P: Where do you see the market for HME provider insurance in the next 5 years?

Santoli: I think we will see stable rates. If there are no more catastrophes or terrorist attacks, and capital stays like it is, we might very well see more competition in the marketplace.

This interview was conducted by Marianne Matthews, a contributing writer for Dealer/Provider.