Ah, the lure of money. Normally, that's what capitalism and a free market are all about. Money motivates folks to exploit opportunities. In the insurance business, though, that lure really can be a siren's call -- drawing the unsuspecting into seemingly lucrative markets and then tossing them onto the rocks.

So what does this mean in the context of medical-malpractice insurer ProAssurance (NYSE:PRA)? It mostly means that what had been a hard market (meaning high rates) may be softening as well-heeled -- but perhaps not well-equipped -- entities try to get into this market and reap some profits. What they'll mostly likely learn, though, is that this is an insurance specialty that requires above-average expertise and that your average players are probably going to earn below-average returns on their capital over the cycle.

Fortunately, ProAssurance is an above-average player. And results this quarter certainly didn't hurt my opinion of the company. Gross written premiums were up more than 11%, helped substantially by an acquisition, while net earned premiums rose more than 10%. The company boosted its policyholder retention a bit and also saw a mid-single-digit rate increase in those renewals.

The risk-management side of things also went well. The company's combined ratio fell as the loss ratio improved by nearly 8 points. Strip out the benefits from favorable reserve developments, and the company still improved on a year-over-year basis and on a sequential basis, too.

Unlike reinsurance companies, where you can often find some bargains like Endurance (NYSE:ENH), RenaissanceRe (NYSE:RNR), or XL Capital (NYSE:XL) in the wake of huge claim payouts, I think you've got to be more patient with stocks like ProAssurance and let the insurance cycle play itself it out.

The more I look around the insurance sector in general, the more I come to appreciate the benefits of going with the proven and successful operators like ProAssurance. That said, I still don't find the stock price to be a great bargain. It's not really overvalued, mind you, and there are some who see nothing wrong in paying fair value, but I'm a cheapskate. I'd love to re-evaluate this one at a lower price, but for now, I'm still just watching from the sidelines.

For more Foolish thoughts on insurance:

Cheapskates, rejoice! Philip Durell's Motley Fool Inside Valuenewsletter service serves up nothing but great companies trading at bargain prices. See for yourself with a free 30-day trial.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).