Exh. 10-36
                                 FIRST AMENDMENT
                                       TO
               1995 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
                                       OF
                     AMERICAN PHYSICIANS SERVICE GROUP, INC.


         American  Physicians  Service  Group,  Inc., a Texas  corporation  (the
"Corporation"),  hereby adopts this first  amendment  (this  "Amendment") to its
1995 Incentive and Non-qualified  Stock Option Plan, a copy of which is attached
hereto as Exhibit A, (the "Plan")  effective for all purposes as of December 10,
1997 (the "Effective Date").

                                 R E C I T A L S

         WHEREAS, on June 13, 1996 the Corporation adopted the Plan; and

         WHEREAS,   the  Corporation's  Board  of  Directors  have  approved  an
amendment to the Plan, as contained  herein,  pursuant to which (i) the Plan may
be  administered  by either the Board of  Directors  or a committee of the Board
duly appointed under the terms of the Plan and comprised  solely of non-employee
directors,  and (ii) the holders of  Non-Qualified  Stock Options (as defined in
the Plan) may,  upon  approval,  assign or transfer such Options or their rights
thereunder; and

         WHEREAS,  the  Corporation  desires  to amend the Plan to  reflect  the
incorporation of this Amendment.
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         NOW,  THEREFORE,  in consideration  of, and pursuant to, the foregoing,
the Corporation hereby adopts this Amendment to the Plan as follows:

         1.  Article  II of the Plan is  hereby  amended  to  delete  the  first
sentence which reads:

                           This Plan shall be  administered  by a committee (the
                  "Committee")  composed of members  selected by, and serving at
                  the  pleasure  of, the Board of  Directors of the Company (the
                  "Board").

          and to replace such sentence with the following text:

                           This Plan shall be administered by an  administrative
                  body (the "Committee") designated by the Board of Directors of
                  the Company (the "Board").  The Board may designate  itself as
                  the Committee or appoint two or more non-employee directors to
                  a committee which shall serve as the Committee.

         Article II of the Plan is further  amended to delete the sentence which
reads:

                           Consistent  with Rule  16b-3  each  committee  member
                  shall be a  disinterested  person,  i.e., a person who has not
                  been  granted  any equity  security  pursuant to a plan of the
                  corporation or any of its affiliates during the one year prior
                  to his  becoming  a  committee  member or during the period he
                  serves as a committee member.
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         2. Article VII of the Plan is hereby amended to read in its entirety as
follows:

                           Incentive   Stock  Options  and  all  rights  granted
                  thereunder shall not be transferable other than by will or the
                  laws of descent and distribution.  Non-Qualified Stock Options
                  and all rights granted  thereunder  shall not be  transferable
                  other than by will or the laws or descent and distribution, or
                  upon the express  prior  written  consent of the  Committee in
                  each   instance.   All   Incentive   Stock  Options  shall  be
                  exercisable  during  the  Optionee's  lifetime,  only  by  the
                  Optionee or the Optionee's guardian or legal representative.

         3. Except as specifically amended hereby, the Plan shall remain in full
force and effect in accordance with its terms. The Corporation shall be entitled
to amend and restate the Plan document to incorporate  the foregoing and Exhibit
A into a single document.



<PAGE>



IN WITNESS WHEREOF, the Board of Directors, acting pursuant to Article XI of the
Plan, has approved and adopted this Amendment as of the Effective Date.



                     AMERICAN PHYSICIANS SERVICE GROUP, INC.

                                        By: /s/ William Hayes
                                            -----------------
                                            William Hayes
                                            Secretary



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