The Corporate Turnaround of Physicians’ Reciprocal Insurers at 2 Years

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The Corporate Turnaround of Physicians’ Reciprocal Insurers at 2 Years

To turn around an insurance company —especially one with liabilities exceeding its assets by more than $300 million, large underwriting losses and deteriorating levels of premium — requires a plan. Executives at PRIMMA LLC, the current attorney-in-fact for Physicians’ Reciprocal Insurers (PRI), began implementing that plan two years ago when they were tapped by the PRI Board of Governors to replace Administrators for the Professions (AFP), which had its authority to manage the reciprocal revoked by the New York State Department of Financial Services for “repeatedly and consistently” breaching fiduciary and other duties to the company’s insureds.

PRIMMA president and chief executive officer Bruce Shulan was initially brought in by the PRI Board of Governors in November of 2016 to act as the company’s chief restructuring officer. At the time, the reciprocal was still managed by AFP and had reported a 2015 net underwriting loss of $12 million (after a $25 million loss in 2014), net premium written had decreased by $90 million and was involved in a political scandal that ultimately led to the conviction of the New York State Senate Majority Leader on charges of bribery, extortion and conspiracy.

When AFP had its authority to act as attorney-in-fact terminated in July of 2017, PRI installed PRIMMA as its wholly-owned attorney-in-fact. Executive vice presidents Brian Nolan and William Jacobi joined Shulan at PRIMMA soon thereafter.

In the two years since taking over management of PRI, PRIMMA has posted an overall surplus improvement of $153 million (from negative $341 million at July 1, 2017, to negative $188 million at March 31, 2019) and accrued net income of more than $155 million. The company has also significantly invested in its online presence, including an updated website and CME-accredited educational videos.

“We recognized that we couldn’t compete based on the strength of our balance sheet, our negative surplus, and we were aware from broker feedback that the word on the street was we were going to go out of business at any time,” Shulan said. “We sat down and made the conscious decision that if we couldn’t compete on the basis of a balance sheet, we had to become more customer-centric; service to the policyholder and the prospective policyholder had to become the primary goal. Throughout our entire operations —ranging from potential applicant to active insured to insured with a claim to someone no longer insured with a claim — our goal is to do a better job than everybody else.

“But in the end, we got to our improved financial state through a combination of hard work and an emphasis on claims handling, the underwriting process and expense reduction.”


The first thing on PRIMMA’s agenda was to drive down PRI’s cost of handling claims, implementing a more disciplined, data-driven approach to managing litigation costs.

“We identified very early on in 2017 the opportunity to change the way claims were being handled and an opportunity to become more aggressive in the defense of our insureds,” Shulan said. “Our first task was to reengineer the way claims were handled in the company, and that’s a large part of the early surplus improvement that you see in our financials. The vast majority of the 2017 surplus improvement, and roughly half of the 2018 surplus improvement, comes out of the fact that we changed the way we handle claims, such that a claim that cost ‘X,” we’ll say three or four years ago, now costs ‘X minus Y.’

“We’ve driven down the cost of handling claims. We’ve driven down the cost of certain types of claims. When you spread that decrease over the universe of our reserves, gradually the actuaries are now projecting that our ultimates are starting to come down across various years.”

To depress claims-handling costs, PRIMMA executives emphasized the importance of data information and inter-department communication, marrying information that came out of each department — underwriting, claims, actuary, finance — together to maximize decision-making processes. This also offers the ability to be much more aggressive in managing the different aspects of claims handling.

“On the claims side, in particular, we’re using much more data analytics, which lets us assist our outside counsel much more effectively,” Nolan said. “We’ve revamped our defense counsel with this data, identifying which counsel has historically had better success in certain jurisdictions and with certain specialties and focused that counsel on those specialties and jurisdictions.”


Following an unprecedented decade of underwriting profitability, when viewed as a whole, the medical professional liability industry has been underwriting at a loss since 2016. In contrast, PRI has been able to decrease its loss ratio by 10 points since PRIMMA assumed management two years ago — especially impressive in a state as highly regulated as New York.

“We completely reengineered the underwriting process in this company,” Shulan said. “Entering 2018, our actuarial projection indicated we would underwrite at roughly an 85-per-cent loss ratio. Looking at 2018 in the rearview mirror, and looking forward into 2019, that loss ratio has dropped 10 points. We’re now in the 71- to 73-percent range. We’re clearly more selective in our underwriting, and we focus on areas where we think we can successfully underwrite at breakeven or better.”

In addition to its more-disciplined underwriting, PRI has invested in technologies that streamline the application process by automatically removing redundant questions and give insureds greater access to their accounts via a portal on the company’s website.

“In addition to those technology investments on the front end, we have similarly invested in behind-the-scenes technology,” Shulan said. “The technology doesn’t replace our decision-making process, but it makes available much more credible data to make better-reasoned underwriting decisions.”


Critical to any turnaround is increasing income and reducing costs, but when management emphasizes cost reduction over strategic investment, ultimate profitability can suffer. PRIMMA took an inverse approach to reducing PRI’s cost of doing business.

“As a result of reengineering the claims and underwriting departments, our operating expense is probably 60 percent of where it was before we took over,” Shulan said. “We didn’t set out to simply reduce operating expense. When a company is in distress, often the knee-jerk reaction is to cut expense by 10 percent, 20 percent. As a result, without a lot of forethought, the reduction is enforced, expenses are reduced, capital expenditures to improve systems and infrastructure are eliminated and quite often the company actually suffers more by virtue of the expense reduction than it suffered under the expense.

“What we did is we took it from the other end. We reengineered virtually every process in the entire company. The net effect of that was that the operations became more efficient, which resulted in the corresponding reduction in expense. The expense reduction came on the heels of the reengineering other aspects of the business, as opposed to expense reduction being the primary target.”

Credit: Mike Matray, Editor, Medical Liability Monitor