🔒With Florida acquisition, Glastonbury malpractice insurer Integris Group seeks growth in lower-cost markets

A Glastonbury-based medical malpractice insurance company originally founded by a group of Connecticut doctors is set to close on an acquisition of a Florida insurer, a move that will allow it to enter a new market and nearly double in size.

Integris Group — Connecticut’s second-largest medical malpractice insurer that also sells policies in Massachusetts — recently agreed to acquire Jacksonville-based MedMal Direct Insurance Co. from Physicians Trust Inc.

Financial terms of the deal, which is expected to close by the end of this year, weren’t disclosed.

The expansion will enable Integris Group to sell policies in southeastern states that tend to have lower coverage needs — and smaller malpractice payouts — than Connecticut, according to CEO Stephen J. Gallant.

The geographic diversification is aimed at reducing costs in an ultra-competitive market, he said.

The deal follows a four-year process that involved Integris Group changing its company structure from a mutual insurer to a mutual holding company, which allowed it to pursue an acquisition, Gallant said.

“We changed our structure in 2020 to allow for a transaction like this to happen,” Gallant said. “It made it much easier in terms of our setup.”

Integris, with $33 million in direct written premiums at the end of 2022, is slightly larger than MedMal, with $26 million in direct written premiums.

Integris has agreed to keep all of MedMal’s 35 employees, and will maintain the company’s Jacksonville headquarters. The new employees will complement Integris’ 35 workers, bringing the total number of staff to 70.

Company structure

Integris Group was formed in 1984, at a time when many insurance companies stopped underwriting medical malpractice coverage due to the high costs, Gallant said.

Connecticut doctors who couldn’t find insurance pooled their resources and formed their own insurance company, Integris, he explained.

Integris primarily writes professional liability insurance policies for small and large physician groups.

It does not insure hospitals.

Integris was a mutual insurance company, a nonprofit owned by its policyholders, until fall 2020, when the Connecticut Insurance Department approved its conversion to a mutual holding company.

While many mutual insurers convert to mutual holding companies when they need investors to raise capital, in Integris’ case, it wanted to grow outside its home state by acquiring or affiliating with another company.

As a mutual insurer, it didn’t have the ability to acquire a stock-owned company like MedMal, which sells medical malpractice insurance in Florida, Georgia and Texas.

Combined, the companies will be licensed to transact business in 23 states and the District of Columbia.

Industry challenges

Medical malpractice insurance is a significant expense for physician groups in Connecticut, Gallant said.

The Connecticut State Medical Society, a lobbying group for doctors, says the state’s high healthcare costs are driven, in part, by the litigious medical malpractice environment here.

Malpractice insurers feel the pressure of high payouts, too, Gallant said.

Connecticut’s lack of a limit on damages in medical malpractice cases can contribute to large settlements in favor of plaintiffs, according to the medical society.

Also, when economic damages are calculated for a plaintiff, the amounts tend to be higher in states like Connecticut, which have a high standard of living, Gallant said. That means doctors require more coverage in Connecticut.

The typical policy Integris writes carries a $1 million minimum, he said.

“Whereas, in other parts of the country, … the minimum and common coverage amount is $250,000,” Gallant said. “So, we’re four times their minimum. In a lot of cases, it’s more like eight times.”

Escalating costs

The average payout for a medical malpractice claim in Connecticut, including those that went to trial, was $918,666 between 2018 and 2022, according to data from the Connecticut Insurance Department.

Total medical malpractice market written premiums increased from $157 million in 2015, to $253 million in 2021, the data shows.

Direct losses paid have also been on the rise in Connecticut’s medical malpractice market, totaling $138.4 million in 2015, to a high of $173.6 million in 2020, before dropping to $140.3 million in 2022.

Integris’ direct written premiums in Connecticut increased from $19.2 million in 2021, to $21.2 million in 2022. Its direct losses paid also increased, from $8.6 million in 2021 to $9.9 million in 2022, according to Connecticut Insurance Department data.

The only medical malpractice insurer with a larger Connecticut market share than Integris is MCIC Vermont, which recorded $129.2 million in direct written premiums in 2022.

Dr. Gregory Shangold is the president of Northeast Emergency Medicine Specialists, a group of ER doctors based in Willimantic.

His physician group, which sees about 160,000 emergency patients per year, pays about $650,000 annually for its medical malpractice insurance, Shangold said.

It’s a significant expense, Shangold said, although his rates haven’t increased during the last five years. But that could change, he said, as we move further away from the pandemic, which held up court dockets and delayed jury trials.

“No matter how careful we are, malpractice cases are inevitable,” said Shangold, who is the immediate past president of the Connecticut State Medical Society. “Many of them are not meritorious and arise from bad outcomes, or patients with comorbidities who have bad outcomes. Even when a doctor makes reasonable decisions, bad things can happen.”

Poor decisions can be less expensive for doctors in Florida, where Gallant said cases are more likely to settle for policy limits of around $250,000.

By expanding to the Sunshine State, Integris can sell policies with lower limits, at a lower price.

There has been significant healthcare industry consolidation over the last five-plus years, which has put pressure on malpractice insurers to keep prices stable, Gallant said.

“We have probably the best health care in the country,” he said. “But at the same time, it’s a very difficult environment for folks to be practicing.”