Since the beginning of the last decade, the medical field has seen decreasing premiums, flexible underwriting, and a major increase in capacity. This has all led medical malpractice insurance providers and medical malpractice attorneys to expand their market share. Usually, insurers who offer Professional liability for medical professionals would underprice an account to win business. While many in the insurance industry have recently seen rising rates and diminished capacity, the medical malpractice insurance market has remained unaffected by the hardening market until only recently.
In this kind of hardening market, insurers are less concerned about the growth of their business and more focused on the overall profitability of their existing business. From there, they examine the profitability of an account, and may even reduce overall capacity.
Here are some examples of what is contributing to the changes happening in the medical malpractice liability market:
Severity of Claims
Although claim frequency appears to be slipping, the severity of claims is continuing to see a rise. The higher cost of medical care and rise in litigation costs are all factors. State-level reform has so far been ineffective in lowering claim inflation. Also, many of the high-dollar severity claims are appearing in areas not historically known for these verdicts.
Consolidation Among Health Care Providers
While the cost of claims and related expenses continues to rise, the premium volume for many medical malpractice liability insurers continues to dip due to consolidation among Health care providers. Medical malpractice insurers are discovering that the risk profile has updated within their business as larger systems absorb smaller practices. This leaves them with risks that have a higher opportunity for loss.
Eroding Liability Capacity
The rise in claims’ severity, along with the changing risk profile and need for malpractice insurers to cut down on their combined loss ratio and return to profitability have malpractice insurers controlling their capacity. Insurers are mindful of the stage where the risk is located, taking into consideration the legal atmosphere of certain governments.
Considerations for the Future of Medical Malpractice
At this point, doctors may be asking, how can medical malpractice be prevented? But for medical malpractice insurers, they need to be looking ahead. The days of decreasing premiums seem to be gone for the time being. It’s more than likely that the market will see a rise in rates as liability carriers look to rebuild their reserves and strengthen their combined loss ratios that have been higher than 100% for years at this point.
Carriers need to be sure to partner with trusted clients who understand that the market is changing and needs to be navigated in new ways. Medical malpractice premiums have been on the decline for more than 10 years and many brokers have not experienced this kind of hardening and don’t understand the related challenges.
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