According to U.S. Bureau of Labor Statistics, overall employment in the healthcare industry is down by 542,000 since February 2020. The Association of American Medical Colleges (AAMC) projects that the United States will face a shortage of between 54,100 and 139,000 physicians by the year 2033.
Medical Professional Liability insurers are feeling pressure as the roles of healthcare professionals evolve. Coupled with the physician shortage, it presents another layer of risk as more changes to the traditional healthcare system and the scope of practice unfold throughout many states.
As we are a year into the COVID-19 outbreak, many Medical Professional Liability (MPL) insurers have been sharply impacted. Their financial strength and reserves are being challenged because of lost revenue. The full magnitude of how the pandemic will affect the MPL market is still to be determined, given the lengthy period of time it takes from filing a medical malpractice lawsuit to the point of final resolution.
Many states have enacted rules (through legislation or emergency orders) that shield healthcare workers from lawsuits arising from their treatment of COVID-19 patients during the outbreak. This has discouraged most plaintiff attorneys from asserting litigation for COVID-19 medical malpractice suits.
MPL insurers are rethinking their overall books of business and underwriting guidelines given the increase in the severity of MPL claims. A recent article in Medical Liability Monitor mentioned the average cost of a claim increased by 50% since 2009, with payouts of above $5 million have increased since 2015.
Industry data suggest that rates for new MPL policies (as well as renewals) will increase between 5% – 15%, with those more specialized classes (and hospitals) rates potentially seeing an increase of 20%.
This is due to the following factors:
- Rise in total claim payouts (increase in severity, larger claims)
- Surge in legal defense costs
- Reinsurance carriers raising rates on primary MPL insurers (which increases their total costs)
- Unstable market economy
MPL insurers are adopting a cautious attitude to writing new business, as exhibited by:
- Increasing the minimum amounts of liability coverage on an MPL policy that physician/health facility are required to carry to meet an insurance companies credentialing and re-credentialing requirements
- Increasing policy deductibles, both on a per-claim/occurrence basis
- Attaching COVID exclusion/limitation language to the policy
- Having a moratorium on new business (black out period for writing new MPL policies)
As stated by Gartner, insurers need to be even more adaptable to thrive in an era of increasingly unpredictable and highly challenging operating conditions. Successful insurers will shift their business model to be more digitally enabled and focusing investment in data and digital tools.
Having a strong core technology platform allows an insurer to be innovative, to create a digital strategy, and to achieve significant modernization benefits that transform critical business challenges into measurable results.