NU Online News Service, Jan. 3, 2:23 p.m. EST
The shift from single or small groups of physicians practice to multi-specialty and multi-state physician networks and hospitals will likely drive a change in the medical professional liability (MPL) insurance sector, says a report from Moody's Investor Service.
Alan Murray, vice president at Moody's and author of the report, says there will be a "shift in market share toward MPL (also known as medical malpractice) insurers with multi-specialty and multi-state underwriting and claim-servicing capabilities for both individual medical practitioners and institutional healthcare organizations over time."
Healthcare is becoming more institutional in its delivery of services and "more corporate in its oversight and governance," says the report, and given then difference in coverage needs for individual medical professionals and institutional providers, "Moodys' finds that the participation in the MPL sector by specialty MPL underwriters—for whom the MPL line is their predominant business line—is more significant in the individual practitioner and small-to-medium group market.
Multi-line and multi-state underwriters will gradually have a greater share of the institutional market, Moody's says.
Currently, the MPL sector remains fragmented with more than 200 insurance groups participating—the largest of which has a 7 percent share of direct written premiums. Many carriers are state-specific, but they could be pressured by the larger, multi-state carriers if the state-specific carriers "lack the expertise in this dually-focused insurance market," or lack the financial strength to offer adequate limits.
Opportunities in the market may arise as there continues to be a continued "downward shift" of services provided by trained or licensed non-physician medical professionals, who also need MPL. Coverage here will likely be new and different.
Though it accounts for just 2 percent of annual direct premiums in the U.S. P&C industry, MPL is integral to the healthcare system and has performed well in recent years thanks to a hard market in the early 2000s and a drop in severity due to tort reform and court precedents, according to Moody's.
The combined ratio in the sector has dropped from more than 140 in 2011 to about 60 in 2010, leading to ample margins in MPL insurers' reserves. Moody's says the sector is likely to enjoy favorable ratios for at least the next 1-2 years.
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