Medical-malpractice insurers are enjoying profitable results, even though premium volume is decreasing.
“It’s a good time to be in this line of business,” says Robert Allen, senior vice president of medical-professional liability for Torus. “Underlying trends have kept the line profitable, and on the underwriting side, everyone remains disciplined.
“I haven’t seen any major shift in limits,” he adds. “Capacity and terms have been managed.”
According to a special report from rating-agency A.M. Best Co., the combined ratio among medical-professional-liability insurers was 81.4 in 2010 compared to 95.2 in 2006.
Tort reforms and improve-ments in patient safety have dropped the frequency of claims since about 2004, says Rob Francis, COO at The Doctors Co.
But he says The Doctors Co. is seeing severity of claims increase moderately, eliminating the benefits of the frequency decline.
On the pricing front, there is a difference of opinion. Some see rates decreasing, but Francis says, “We expect pricing to begin to flatten and even rise modestly in some venues over the next year or two.”
Health providers are focusing more on risk-management programs and following more stringent standards for patient care since healthcare reform passed, as grades for facilities are made more publicly available.
Providers are also investing more in technology, such as programs to keep track of prescriptions (which helps avoid allergic reactions and the adverse effects of medication interactions).
“Healthcare providers want to be named among the top facilities in the country,” says Kevin Junod, executive vice president and healthcare-practice leader in the Northeast for broker Lockton, noting that a high ranking can help increase revenues. “This has had a positive impact on medical malpractice, and the best hospitals are receiving good treatment in the [insurance] marketplace.”
Paul Gabel, vice president for Norcal Mutual Insurance Co., agrees that the decline in frequency over the last seven to eight years is due, at least in part, to “risk management really being effective and working its way through—making headway with coordinate efforts.”
Healthcare providers are simply better than they were five or 10 years ago, offers Allen, because of the public accessibility to grades.
“Historically the attention to quality was not there,” he says. Now the healthcare industry does not put quality, patient safety and risk management in silos, Allen says.
“Everything is now integrated, and it’s benefitted everyone—keeping costs down and premiums down, while efficiency improves.”
TREND AWAY FROM SOLO DOCTORS
Trends in the market include a shift away from insuring the individual physician.
“Those days are over,” says Allen, as individual doctors and those in small practices are joining hospital organizations. Healthcare systems are also combining to form “joint-defense opportunities” against medical-malpractice lawsuits.
“They are now on the same team, with the same deep pocket,” Allen says.
However, the moves present underwriting challenges.
“It presents a different risk,” says Junod. “Insurers need to take into account this underlying-exposure change. What’s the loss history [of the new physician(s)]? How does this impact the risk profile?”
Hospitals may roll the new risk into captives or a self-insurance program until enough data on the integration of new doctors is available in order to underwrite, Junod adds.
Medical-professional-liability insurance providers are also keeping an eye on tort reform—especially caps on non-economic damages.
“In the states that have put caps on non-economic damages, the assault on them is continuous,” says Francis of The Doctors Co.
In states where caps are in place, such as in Texas, insurance costs have decreased, and more physicians offer their services, he says.
“Caps are very effective and have been a critical part of the health system, as well as a critical part of a robust and competitive marketplace for medical-professional-liability insurance,” Francis says.
The caps allow insurers to establish “more consistent rates,” adds Gabel of Norcal, since it allows them to “assess and predict the unknown—namely, non-economic damages.
“Threats to overturn caps are a concern to us,” says Gabel.