What This Means for You

By Steve Spencer

As everyone knows by now, The Doctors Company has entered an agreement to buy ProAssurance for $1.3 billion. ProAssurance stockholders will get $25 in cash for the stock. The transaction is expected to close in the first half of 2026. Upon completion, ProAssurance’s common stock will no longer be listed on the New York Stock Exchange, and ProAssurance will become a wholly owned subsidiary of The Doctors Company, creating a combined company with assets of approximately $12 billion.

ProAssurance got its start in the 1970s. At that time, the medical malpractice market in Alabama was in disarray. Juries were giving out exceptionally large awards leading to a spike in malpractice insurance premiums, and it became hard for many physicians to get coverage. On top of that, insurers were settling cases, rather than fighting, regardless of the merit.

This moved Urologist Derrill Crowe, MD to start the Mutual Assurance Society of Alabama. “About 1973, the carrier that brokered almost 90 percent of the coverage for the doctors in Alabama decided to get out of the medical malpractice market,” Crowe said in the 2007 Annual Report. “We looked for about six months locally and couldn’t find anybody to insure our practice. We went to Europe and still couldn’t find anyone. So we decided to form an insurance company, Mutual Assurance.

“Doctors put up about $2.5 million at $1,000 a piece, so 2,500 physicians that were participating

gave us about $8 million. And we wrote our first policy on April 1, 1977. The doctors gave us several mandates. First, they wanted us to be financially sound and always be present. The second thing, most important, was they were tired of seeing cases settled that did not have merit, settled for nuisance value, and they wanted us to fight those.”

It was formed as a mutual insurer, which mean the policy holders were owners of the company. The name was later changed to Medical Assurance, and in 1991 the company demutualized in order to go public. From that point on, Medical Assurance, which later became ProAssurance was owned by stockholders.

What does this mean to ProAssurance policy holders?

Like ProAssurance, The Doctors Company was established in the late 1970s in response to the medical malpractice insurance crisis in California, where lawsuits and jury awards were skyrocketing.

Today, ProAssurance is owned by stockholders whereas The Doctors Company is a mutual insurer, which means it’s owned by the policyholders. A stock company has to bring in enough in premiums to cover defense costs, indemnity costs, the cost of operations, with enough left over in profits for shareholders. On the other hand, a mutual insurer only needs the first three: covering defense costs, indemnity costs, and the cost of operations. After that, what would normally go to stockholders instead inures to the policy holders, as they are the actual owners of the company.

In addition to the dividend which is paid to policy holder physicians, The Doctors Company has their Tribute Plan. Created in 2007, the Tribute Plan contributes surplus dollars back to the physicians’ Tribute Plan account. It has historically been around ten percent of the physician’s premiums. To date, the company has distributed more than $175 million in Tribute Plan awards to almost 14,000 members. Physicians take their money out of the plan when they retire. The largest payment to date is $264,808. A rated (Excellent) by AM Best and A rated (Strong) by Fitch, The Doctors Company, headquartered in Napa, California, is the nation’s largest physician-owned medical malpractice insurer with $7.3 billion in assets, and a member surplus of $2,878,000, which is the strongest of any national physician-owned medical liability carrier. The company’s written premium-to-surplus ratio is a remarkable 0.44:1, much better than the industry standard of 3:1. Likewise, The Doctors Company’s reserves-to-surplus ratio is 1.21:1 compared to an industry standard of no more than 4:1.

All these metrics suggest that the merger with The Doctors Company should be a great fit for ProAssurance policy holders.