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Systemic Risk

The national debate is focused on health insurance and healthcare. But who insures the healthcare system?

By  Kevin Amrhein

In some form or another, healthcare as we know it will soon change.

Congress insists that reform legislation is not aimed at dismantling the vast network of manufacturers, distributors, vendors and providers of healthcare products and services. On the contrary, such entities are reform’s crutch, even if Uncle Sam decides to pick up the tab. Add to that a new workplace culture of wellness coupled with the aging population, and one can rationalize the pervasiveness of healthcare and life science insureds.

Few understand this better than Sandie Mullen, life science practice leader for Westrope, a large commercial wholesaler based in Kansas City.

“Life sciences is an evolving industry segment. We see it growing, especially with so much interest in healthcare,” she says. “The pervasiveness of healthcare news is responsible for the growth in demand that has become more pronounced in the last eight to 12 months.”

Retail brokers who sense opportunity in the life sciences arena are often overwhelmed by the depth of the risk. Most lack the resources to assist the insured in identifying complex exposures ranging from products containing excluded components to international supply chains, contractual risk transfer and government regulation.

“Some larger or specialized retailers have expertise in-house. We work directly with those that may not have those resources, often participating in direct contact with the insured,” she says.

Retailers accessing the marketplace directly should be certain that the product is the most suitable for the insured. This requires investigating all available options, including those that may be offered by a wholesale-only E&S market.

“This approach ensures the retailer has the best program for the insured whether through one of their direct carriers or through an E&S carrier and is not caught off guard by another retailer offering a more competitive E&S option,” Mullen says.

Westrope uses an established network of admitted carriers, wholesale-only admitted carriers and E&S markets to broker many coverage areas for life science and biotech companies.

“The insureds include organizations that design, manufacture and/or distribute medical devices, diagnostic instruments, pharmaceuticals, over-the-counter drugs, vitamins, minerals and botanicals,” she says. Available coverages address both FDA-regulated and non-regulated products.

From an insurance perspective, many of the risks associated with life science products cause as much concern as the litany of potential side effects.

“Many retailers may not have experience with insurance products designed to address overseas risk,” Mullen says. Clinical trials are a perfect example. They are often conducted abroad. “[This is] common because of the litigious environment and cost here in the U.S.”

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