At the Crittenden Medical Liability conference in April, industry experts highlighted the ongoing struggles within the Medical Professional Liability (MPL) sector, focusing on the escalation of claim severity, underwriting losses and the broader financial impact.
The opening keynote panel covered current trends — and biggest challenges — in medical liability insurance, as well as the opportunities to lay the groundwork for the road ahead.
Panelists included:
Tim Zawacki, principal research analyst, S&P Global Market
Dennis Cook, President, Liberty Mutual Healthcare and Ironshore Healthcare
Richard Henderson, Senior Vice President, TransRe
Michelle Langen, Medical Professional Liability Director, Hudson Insurance Group
William Cotter, President and CEO, Physicians Insurance
Here were some key discussions and findings in regards to challenges in 2023 and 2024:
Increased Claim Severity and Frequency
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- The MPL industry has experienced significant increases in both the frequency and severity of claims, particularly in the senior care sectors. This trend reflects a broader pattern seen across various lines of business, including auto insurance, where similar increases in claims have been noted.
- Notably, the industry is encountering larger settlements and verdicts, contributing to a challenging financial environment.
Underwriting Losses
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- The MPL industry is anticipated to record its seventh consecutive year of underwriting losses for 2023. This ongoing trend underscores the sector’s persistent financial difficulties.
- The combined ratio for MPL insurance is expected to remain unfavorable, with 2023 showing worse results compared to previous years. The commercial auto sector, facing similar issues, is cited as a comparative example of the broader challenges affecting the industry.
Verdict Trends and Social Inflation
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- Data on large verdicts reveals a troubling trend: the magnitude of significant verdicts is increasing. Charts comparing verdict sizes over recent years indicate that the average value of large verdicts has risen, with the 10th, 25th and 50th largest verdicts all showing upward trends.
- Social inflation, characterized by rising claims costs and larger verdicts, continues to impact the industry. The percentage of verdicts exceeding $25 million among those over $10 million has increased significantly, reaching 50% in 2023.
Impact of COVID-19 on Claims
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- The COVID-19 pandemic disrupted trial schedules, leading to a backlog of significant claims. Although trials resumed in 2022, the expected decrease in the number of large claims did not materialize, with 2023 experiencing even higher claim severities than previous years.
Industry Challenges and Future Outlook
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- The MPL industry is struggling with high-frequency, high-severity claims and continued financial losses. Despite maintaining a consistent win rate in cases, the increasing cost of losing claims poses a significant problem.
- The sector faces an uncertain future as it approaches the eighth consecutive year of underwriting losses, with ongoing issues such as social inflation and large settlements continuing to pose risks.
The MPL industry remains under severe strain, grappling with rising claim costs and persistent underwriting losses. The increase in high-value verdicts and the impact of social inflation are key challenges as the sector looks to navigate these difficult trends into 2024.
