ISMIE Mutual Insurance Company

Liability Insurance

ISMIE Mutual's Relationship with Brokers

Why does ISMIE Mutual work with brokers?

ISMIE Mutual accepts business on both a direct and brokered basis. It is a policyholder’s choice whether or not to use a broker.

Until the mid-1990s, ISMIE did not accept broker business. Prior to that time, ISMIE was a direct writer, i.e., ISMIE initiated and maintained a direct relationship with its policyholders. During the mid-1990s, when more than 40 companies were writing medical liability insurance in Illinois, an increasing number of physicians began to use brokers to shop for insurance coverage. This was true of ISMIE policyholders, as well as physicians who were not insured through ISMIE. To accommodate ISMIE insureds and prospective insureds, ISMIE agreed to work with brokers and to accept business from them.

Currently more than 60 percent of ISMIE’s policyholders have chosen to use the services of brokers. This is an overwhelming majority. As long as policyholders choose to use brokers, ISMIE will, without hesitation, accommodate that choice.

How are brokers compensated?

Brokers are compensated through the payment of commissions. Even though it is the policyholder who decides to utilize the services of a broker, it is the insurance company that actually pays the commission. This is true in any line of insurance – whether it be for auto, home, medical liability, health, etc.

The amount of commission that ISMIE pays a broker is a percentage of the policyholder’s annual premium.

The commissions paid to brokers are but one part of ISMIE’s overall administrative and operating costs. All such administrative costs are included in the development of ISMIE’s rates. This is standard insurance industry practice. An insurance company’s rates must account for both loss costs, as well as all of the expenses necessary to manage the company’s activities.

If I don’t use a broker, and ISMIE does not have to pay commission, why can’t I receive a discount?

Commissions paid to brokers are part of the overall operating expenses factored into annual premium rates. Throughout the insurance industry – not just medical liability, but also auto, home, health, etc. – it is one of the various operational expenses incurred by an insurance company.

The basic philosophy of insurance is to spread risk among policyholders based upon the individual insured’s exposure to potential loss. Fair underwriting practice dictates that physicians in different specialties and different geographic locations pay premiums based on the loss history of those specialties and locations. Certain specialties and counties that exhibit similar loss patterns are grouped together. All policyholders share the costs of common operational expenses. Broker commissions are part of those operational expenses that are shared among all the policyholders.

Why doesn’t ISMIE stop using brokers, so as to bring premiums down?

ISMIE has always believed that a direct relationship with policyholders is the best relationship. However, more than 60 percent of ISMIE’s policyholders now choose to use the services of a broker. In keeping with the changing business and professional desires of our physician colleagues, and our hallmark service philosophy, ISMIE will accommodate a policyholder’s decision to engage a broker.