Up until last year, Carl T. Hook worked full time as an ear, nose
and throat doctor. Now, he serves as the eyes, ears and mouthpiece
for Physicians Liability Insurance Co.'s board of directors - and
often as a shoulder for physicians to cry on.
Now I get to answer the phone and talk to doctors when they have
an opinion, when they have something to say, said Hook, president
and chief executive officer of PLICO, the insurance company owned by
the Oklahoma State Medical Association. Sometimes it's support, and
keep on swinging. Sometimes it's criticism. I get both of those.
But one of my big goals is to improve the communication this
company has had in the past with our doctors, so that they are
informed and understand our insurance proceedings better, said Hook.
The learning curve has been steep for both Hook and the physicians
insured by the company as PLICO has gone through extensive changes
over the last few years.
One thing he wants physicians to understand is that things are
definitely looking up for the company, and that PLICO will be there
for physicians when they need help. A few years ago, things didn't
look nearly so good for the state's largest physician insurer.
The large financial issue came about when the (Oklahoma State)
Insurance Department and the actuaries reviewed the very steep curve
of how large of verdicts were occurring in medical malpractice
cases, said Hook. And that was not unique to Oklahoma - that was
across the country. In fact, most of these things happened in other
The verdicts here in Oklahoma did triple, almost quadruple,
between '99 and 2003, said Hook. Frequency was going up slightly,
steadily, and had done that for several years. But the severity
jumped up tremendously.
The new system
Because PLICO has operated on a not-for-profit basis, as an
entity created by physicians for physicians, the Insurance
Department did not place the same requirements on the company as it
has on other private insurance companies.
Since PLICO began in 1980, the company had not been required to
build up enough reserves to pay all the claims on its books in the
event the company went under, as other insurers are required to do.
But in 2003, the Insurance Department deemed PLICO would need to
hold about $250 million in reserves. At that time, the company had
just over $100 million in the bank, and since the company was
managed by third-party administrator CL Frates and Co., the company
owned virtually no assets.
In 2004, the company was placed under the formal supervision of
the Insurance Department. Board members met with consultants and
Insurance Department officials for months, trying to devise a way to
turn the company's finances around. They came up with a multifaceted
PLICO raised premiums by 40 percent in 2004, and then another 65
percent in 2005. Previously, premiums were so low that even with
increases, PLICO is able to offer insurance at a lower cost than is
available in 38 other states, said Hook.
They asked the physicians who obtain their insurance from PLICO
to commit to the company, not just for one year, but for 30 months.
The 30-month contracts could be shown on the books as company
assets, and in return, PLICO guaranteed physicians that their
premiums would not be raised again for the duration of the 30-month
PLICO also changed the type of insurance they offered, from
occurrence to claims based.
As long as you were insured at the time of an incident, then (the
coverage is) there forever, and so something I did 10 years ago, if
the event occurred at the time I was insured - I could be retired,
done, not buying insurance anymore, not a practicing physician - and
this company was still liable to pay for that, under the old system,
said Hook. Now, claims made means that you have to be paying a
premium for insurance at the time that the claim is presented to the