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It’s steady as she goes for the medical professional liability insurance market.
That’s despite the efforts of underwriters to achieve some rate increases in a marketplace that’s been soft for more than a decade. Where increases can be implemented, they tend to be in the low single digits.
Part of the reason for the flatness in the market is the ongoing consolidation of the health care industry. Larger hospitals acquire smaller ones, and independent health care professionals leave private practice to become employees of the larger institutions. Insurers must compete with one another for a piece of a smaller market.
“What we’re seeing in overall med mal is continued consolidation: mergers and acquisitions and also unique affiliations, as the fee-for-service model transitions to a population health model,” said Chris Heckman, vice president of underwriting for health care at Chicago-based CNA Financial Corp. “We are studying the impact that employed physicians have on claims and the marketplace. It’s much less common to see independent physicians today.”
At the same time, new exposures such as those presented by telemedicine create both opportunities and challenges for underwriters. They have to settle issues of how and whether policies will respond to new exposures created by cyber issues as well.
Randall Nukk, area president and managing director of the health care practice with Arthur J. Gallagher & Co. in Rolling Meadows, Illinois, said that on the physician side of the market, “in the late fall, the national players all started talking about how they wanted to see more bottoming out. Nobody’s talking about dramatic changes. It’s been soft for 15 years. The average doc is paying half of what they did 15 years ago. Accident year combined ratios are almost uniformly over 100%. Reserve releases from prior years are beginning to evaporate.”
Mr. Nukk said that on the hospital side, conditions vary. “For small institutions, the market is still pretty soft.” “I think results were mixed, flat to somewhat up,” said Martha Jacobs, national health care industry practice leader for Aon Risk Solutions in Pittsburgh.
She said some insurers wanted higher rates, with a few “pushing for some hard-market pricing and conditions. But there was nothing systemic across the book, overall results were flat with some pockets of upward pressures.”
Through the third quarter, “we had a very good combination of renewal retention and rates,” said Howard H. Friedman, chief actuary and president of the Healthcare Professional Liability Group at ProAssurance Corp. in Birmingham, Alabama. He said that renewal retention was over 90% and rates increased about 1%, “which was a favorable change over what we’ve seen over the past few years.”
Another underwriter also expressed optimism.
“We were really pleased to achieve meaningful rate and improved terms and conditions for those areas that need it the most,” Mr. Heckman said. “We had a very strong December, and we’re encouraged by the results for the beginning of the year.” Carolyn Snow, director of risk management at Humana Inc. in Louisville, Kentucky, said the market “was really very good” for the excess coverage she renewed in January in Bermuda. “We actually had a small decrease,” she added.
Capacity is not an issue, said John Geisbush, managing director at Marsh L.L.C. in Phoenix. “We continue to see an abundance of capacity for medical professional,” he said. For a good account that is stable in terms of exposure and loss development, rates are “slightly” down, he said, while in general “we saw a range of 5% down to 5% up depending on the specifics of an account and where it was located.” With medical professional coverage, there is variation specifically with respect to jurisdiction, he said. Places such as Cook County, Illinois, Philadelphia County, and South Florida are viewed as difficult jurisdictions because of the tort climate, he added.
Increased attention is being paid to policy language, say observers.
“We are seeing increased interest from brokers and insureds for clarity in the contract as well as terms and conditions that are consistent all the way up the program tower,” Joanne Gundersen, vice president and medical malpractice lead for QBE North America in Simsbury, Connecticut, said in an email.
While claims frequency has remained stable, severity has been creeping up, noted ProAssurance’s Mr. Friedman. “The overall changes in health care over past 10 years, including efforts to contain costs on the part of the payers and consolidation in the hospital business, are having an impact on the market. When physicians become employed by larger groups, claims can get larger as the entities involved in the lawsuits generally have higher limits of insurance available.”
Severity is up 3% to 4%, which is about 2% above inflation, Mr. Nukk said.
“In calendar year 2017, there were seven verdicts over $40 million. The number of verdicts over $10 million, 38, was the highest over the last 18 years,” Ms. Jacobs said.
“Caps on noneconomic damages is an effective means of combating runaway verdicts, but currently only 26 states have noneconomic damage caps for medical malpractice cases,” Bridget Zaremba, assistant vice president and health care claims lead for QBE North America in Chicago, said in an email.
While employment practices liability insurance is the primary focus of claims in connection with the “#MeToo” movement against sexual harassment, directors and officers liability insurance is being affected as well.