To the dismay of underwriters, there has not been a hard market in the medical professional liability (MPL) arena in more than a decade. Rates continue to decline across all healthcare subsectors and capacity has grown substantially as new players have entered the market. Underwriters are accepting what appears to be a permanent, competitive landscape. Within the healthcare industry, changes have fundamentally impacted the insurance cycle as carriers are now looking for new strategies in order to succeed.
The main reason for the continuing soft market: The ratio of supply to demand has never been greater. New carrier entrants to both the primary and excess marketplace, as well as the supply of ample reinsurance, offer buyers more options than ever. Overlay the tremendous consolidation among healthcare organizations and the trend toward the employment of physicians who had once been separately insured, and these forces have led to more carriers fighting over a shrinking customer base. As a result, pricing naturally declines in this macro-economic environment.
What have carriers been doing to succeed in the soft market? Insurers have differentiated themselves by tacking on additional coverages and sublimits to their standard professional and general liability policies. These coverages can include crisis response & public relations costs, evacuation expenses, and reimbursement for government regulatory actions.
These “freebies” are attractive to insureds and can tip the scale when clients make decisions on where to place their coverage. Also, many carriers are focusing on niche classes (e.g., home health, outpatient facilities, etc.) within the healthcare industry segment, hoping their deep analyses into these areas will support their new pricing models and product offerings.
Overall, the risk profile of the healthcare industry looks bright. The implementation of advanced technologies in clinical settings, innovative risk management initiatives, and creative claim mitigation strategies has dramatically improved results. Loss experience remains favorable with an industry combined ratio for MPL that has remained in the low 90s. In short, it’s a rosy forecast for buyers!