Insuring the risks of private medical transport services
AMBULANCE services and other medical transportation providers are an integral part of every community. Many, of course, are owned by municipalities or other governmental entities. Coverage for such services usually is arranged as part of the comprehensive insurance program written for the public entity.
But medical transportation services also are provided by private entrepreneurs. These services can make substantial accounts—and an agent or broker doesn’t have to be an expert in public
entity insurance to write them. To learn more about this specialty, we recently spoke with Howard Handler, who as the owner of American Agency in Overland Park, Kan., has been a program administrator in this niche for nearly 25 years. While he writes coverage for municipally owned ambulance services, his forte has been underwriting private medical transporters. At the beginning of the year, he sold his business to Thomco, which continues to operate American Agency as a division, with Mr. Handler in charge as senior vice president. Recently we spoke with Mr. Handler about the particulars of the private medical transportation market. Following is an edited transcript of our conversation.
AAB: How would one describe the private medical transportation business?
Handler: First, it includes private, for-profit ambulance services, not owned by municipalities or other governmental entities, fire departments or volunteer groups. For the most part, these are small closely held corporations. Their main role is to offer medical transportation services on a non-emergency basis. Some, however, provide 911 services for municipalities on a contractual basis or may function as a backup for a municipally owned 911 service.
Private ambulance services also work with hospitals and nursing homes—for instance to
transport a patient or resident off premises for tests or for other reasons, while providing medical care en route. In that regard, private ambulance services furnish both basic and advanced life support services, using employees ranging from basic-level emergency medical technicians all the way up to intermediate and advanced-level paramedics.
AAB: What’s the difference between an EMT and a paramedic?
Handler: A basic EMT has anywhere from 81 to 150 hours of training, depending on the state in which he or she works. A paramedic may have anywhere from 500 to 1,500 hours. Not all states call these employees the same thing. In Oregon, you might have an EMT class 1, 2, 3 and 4, denoting progressively higher levels of training. So the term “EMT” can mean different things to different people. Many intermediate and advanced-level EMTs may not be called paramedics but nonetheless render medical services similar to those provided by paramedics.
AAB: How big is this market?
Handler: There are around 7,000 private for-profit ambulance services.
AAB: How can agents and brokers go about prospecting for such business?
Handler: Most states have a division of emergency medical services, operating under the department of health. Usually, a state EMS director heads up the division. EMS divisions maintain broad databases of EMS services. Some are fairly free with the information. Others pass it along to clearing houses, from which agents can buy databases. Those databases usually are broad and list all licensed, certified emergency medical services providers. Some may be coded; for example, they may denote municipally owned services with a letter “M,” volunteer services with a “V” and privately owned services with a “P.” Agents also can purchase Yellow Pages
databases—most of which confine themselves to private, for-profit services.
AAB: What other sorts of private medical transportation providers are there?
Handler: Paratransit services are one. They transport people, on a non-emergency basis, who have some form of disability. They may be wheel-chair bound, or their disability could be age-related. There also are hospital fleets, which usually include ambulances as well as paratransit vehicles. They may also have vehicles as diverse as truck tractors for transporting mobile diagnostic services, step vans for laundry services and dump trucks for landscaping needs on the hospital compound.
AAB: Are there any centers of influence, like lawyers or accountants, that agents can cultivate in this niche?
Handler: I would probably look more to state associations and develop relationships there. On the national level, there is the American Ambulance Association. Many similar state organizations have a loose relationship with the AAA, although they may not necessarily be state affiliates. Paratransit services have the National Medical Transportation Association.
AAB: Do many agents specialize in this niche?
Handler: This is one of the more difficult niches to break into, because it’s not so large that you
have room for a lot of specialists. Even in a large municipal area, there are going to be only so many ambulance or paratransit services. So if you really want to become a specialist, you’ll have to be prepared to do a lot of traveling. While there are indeed such specialists out there, we get most of our business from local agents and brokers who place just one account with us. Such an agent may know the ambulance service owner through the local Optimist Club or a church, or he may be the godfather to the owner’s child, etc. The agent is happy to have the account—premiums for private medical transportation providers can range from $5,000 to more than $1 million.
AAB: What makes for a good account?
Handler: For an agent who has never written an ambulance service, it may be difficult to tell. But one certainly could take a look at the fleet. If you see rusty, unkempt vehicles, that tells you a great deal. The markets that play in this field are looking for risks that have an above-average orientation toward safety and that have loss histories demonstrating as much.
Of course, the answers on an application also will tell you a lot. For instance, I recently received an application on which the following questions were answered “No”:
—Do you require previous ambulance driving experience for new drivers?
—Do you have an ambulance driver training program?
—Do you have an accident review committee?
— If a driver violates your protocols, is there a disciplinary proceeding?
In response to another question—What is your minimum driver age?—the applicant answered
“18.” I’d like to think that even among agents who have never written an ambulance service, nine out of 10 would still say to themselves, “This isn’t going to fly.”
AAB: Is the auto liability exposure more of a concern than the general or professional liability exposure?
Handler: All three are critical. This is a niche with a unique risk: loading and unloading patients. The cost just to defend such a claim is often equal to, if not greater than, the actual indemnification. When a patient on a stretcher is dropped, the claim could be considered a medical malpractice claim, a general liability claim or even an auto liability claim arising from the
loading and unloading exposure. The last thing the insured needs is to have two or even three insurers arguing over which one should respond to a claim. Consequently, we feel it’s important to have one insurer write all three lines. Not all agents understand that. Some think they can break out the coverages to save clients money, possibly even using assigned-risk markets, and don’t realize the disservice they’re doing to their customers.
AAB: Are there other unusual coverage issues in this niche that agents should be aware of?
Handler: Most of the players in this business for years have offered occurrence-based policy forms. There are a handful of specialty lines and surplus-lines carriers that offer what I would consider to be fairly limited claims-made forms. If an ambulance service with such a policy switches to an occurrence-based policy, it will need to buy an extended reporting period from the former insurer. Not only is the ERP expensive, but often it’s limited to three years or less. For medical malpractice claims, however, the statute of limitations starts to run not at the date of service but at the date of the discovery of the damage resulting from the service. For injured minors, the statute of limitations doesn’t start to run until they reach the age of majority. Because
of such factors, it is not unusual in this niche to have the first report of a loss come five or seven years after an event—long after many “tails” would have expired.
AAB: So you work with admitted companies?
Handler: Correct. Zurich, which we have represented for 15 years, is our sole market.
AAB: Is most coverage in this niche written on an admitted basis?
Handler: From an auto standpoint, most of it is admitted; there are only a couple of states that allow you to write nonadmitted auto on a primary basis. But there are surplus-lines general liability and professional liability products written in this niche.
AAB: What sort of factors do underwriters consider in evaluating the professional liability exposures?
Handler: The number of calls the service gets in a year, and the breakdown between emergency and non-emergency calls. Whether the service provides basic or advanced life support. The litigation climate in the prospect’s service area. Underwriters also analyze loss runs to determine
not only the size of any past claims but also whether employees have dropped patients or have had problems administering IV therapy, intubating patients or performing other medical services in the field.
AAB: In regard to the auto liability exposure, is one person normally assigned to be the primary driver, and does he or she receive extra training?
Handler: Most ambulance services run two-person shifts. The two employees on a shift might both be paramedics, or one might be a basic EMT. On advanced life support calls, one of the employees has to be with the patient. If one of the employees is exhausted or otherwise unable to drive, then the other has to take the wheel. You run into problems if that EMT’s or paramedic’s driving record is so poor that he or she must be excluded under the auto liability coverage. The bottom line is that all EMTs and paramedics must be trained to drive the vehicles—and both
should have good driving records.
We order motor vehicle reports on all drivers, and also check them against a driver database we’ve maintained for years. At the time they are hired, an EMT or paramedic may give an ambulance service a driver’s license that’s only a year or two old, and his record under that license may be relatively clean. But the driver may have moved from a state where he had a much spottier driving record. We often can detect such problems using our database.
AAB: That sounds like a crucial underwriting tool.
Handler: It ultimately helps the ambulance service. If they get a poor driver who has a bad accident, it’s going to increase their premiums sooner or later.
AAB: What do you do if you see someone on the insured’s list of drivers who has had problems in other states?
Handler: This can be a delicate problem, particularly since everyone’s hands are tied by the
Gramm-Leach-Bliley Act and the Fair Credit Reporting Act in regard to the information about someone that can be divulged to third parties. So our practice is simply to inform the ambulance service that a particular driver doesn’t meet our qualification guidelines. The ambulance service has our guidelines and agreed to follow them at the time they became our insured. Our guidelines are fair; we don’t expect everyone to have a crystal-clear MVR—but we’re not looking
for totally below average drivers either. Most states allow insurers to exclude specific drivers by using an endorsement that is signed by an executive officer of the insured.
AAB: Is there any difference in driver training for EMTs or paramedics working for 911 services, as opposed to non-emergency services?
Handler: For all ambulance drivers, a lot of emphasis is placed on driving at the proper speed, based on road, weather and light conditions. After all, these vehicles don’t operate like your car. A
lot of emphasis also is placed on the proper use of the siren, switching it to different modes at different distances from an intersection. Ambulance drivers also must understand the concept of “due regard.” If they are involved in an accident at an intersection, they cannot expect to win a
resulting lawsuit simply by relying on the other vehicle’s failure to yield the right of way to an emergency vehicle; they also must demonstrate due care. Suppose I’m an ambulance driver responding to an emergency call, and I come upon a red light at a four-lane intersection. If I stop and clear each lane, one at a time, before proceeding and do the same thing at the next two or three intersections before being struck by a vehicle, I’ve got a pretty good chance of showing that
I used due regard. On the other hand, if I come upon a red light but just blow through the intersection and assume everyone sees my flashing lights and hears my siren, I can’t win the debate over due regard.
AAB: How are the vehicles usually valued?
Handler: It’s difficult under a stated-amount program to ascertain the value of an ambulance.
You and I can visit the National Automobile Dealers Association’s Web site and see what our cars are worth, but such a database is not available in the ambulance field. So we think the fairest way to settle is on actual cash value at the time of loss. These vehicles tend to depreciate fairly fast, and there’s not a large market for used ambulances.
AAB: What about the equipment inside the ambulances themselves. Is that insured under some kind of marine floater?
Handler: Yes. Such equipment is usually insured on a blanket basis. We use one flat rate for basic units and another rate for advanced life support units.
AAB: How would you characterize the market for medical transportation services?
Handler: It’s still hard. From 1999 to maybe 2001 there were about 15 programs offering package products—I’m not talking about carriers that might insure individual parts of an ambulance-service account on a monoline basis. Today, there are maybe three significant package markets.
AAB: To what degree do these services retain risk? What sort of deductibles or SIRs are
Handler: I can only speak of my own experience. Beyond first-party coverages like physical damage and inland marine, we don’t really offer deductibles. We try to avoid putting the insured in the position of adjusting claims. When insureds have $15,000 or $25,000 SIRs, they often try to adjust claims on their own. Then they get into trouble—and compromise the insurer’s ability to
defend the claim after the SIR is satisfied. This is a niche that is used to first-dollar liability coverage.
AAB: What sort of features should a good package policy for ambulance services have?
Handler: On the ambulance side, the typical package is auto liability, auto physical damage, professional liability, inland marine for the equipment, general liability, property insurance and maybe excess liability. We are looking into a comp facility but are not there yet. Workers comp for ambulance services can be a tough coverage to write. In a lot of states, it’s placed in assigned-
AAB: What sort of risk-management procedures do insurers require or encourage?
Handler: We look closely at ambulance services’ intersection management policies; at their
quality-assurance program for medical training; and at maintenance policies for cots, gurneys and other equipment, as well as vehicles. Most markets offer credits for ambulance services that invest in vehicle monitoring equipment. Such systems are becoming increasingly sophisticated. They can detect when a driver makes jackrabbit starts, stands on the breaks, takes corners too fast or isn’t buckled up. They can tell if a driver is backing up while his partner is still inside the
vehicle, rather than outside spotting for the driver, as he should be. They can tell where a vehicle is located, the speed limit in that area and whether the driver is exceeding it. They can tell when the vehicle’s lights and sirens are on and whether a vehicle in such emergency operation is
exceeding the speed limit within a reasonable tolerance.
AAB: How common are these systems?
Handler: About 20% to 25% of ambulance services have them, and they’re becoming more common all the time. Ambulance services have found that monitoring systems not only increase safety but also can help them control costs. By monitoring the factors mentioned above, some ambulance services have cut fuel costs by 18% and routine maintenance by 20%. They’re also getting one to two years more life out of each vehicle.
We think risk-management should be a vital part of a medical transportation provider’s program. Recently, we held a two-day conference in Chicago for medical transportation providers that focused heavily on risk management and presented a lot of information on monitoring systems. We also have a full-time loss-control engineer available to work with ambulance services, and we plan to make more risk-management information available to ambulance services online. Insurance alone is simply not the answer for medical transportation providers.
(Mr. Handler’s e-mail address is email@example.com.)