Even though there was a slight improvement in net income for 2020, U.S. medical professional liability insurers saw their sixth consecutive year of underwriting losses, according to a new AM Best report.
The ultimate impact of the COVID-19 pandemic in 2020 claim costs still is to be determined, according to the new Best’s Special Report, “Continued Uncertainty Clouds the Horizon for MPL Insurers.” But, on a positive note, the impact of rising claim severity, social inflation and escalating frequency of high severity losses tempered following the onset of the pandemic, as court closures and backlogs slowed down legal processes.
AM Best maintains a negative market segment outlook on the MPL sector, citing ongoing pressures of depressed demand, rate adequacy concerns, rising loss cost trends and the potential for additional claims owing to the pandemic.
Rising medical loss costs, along with relentlessly competitive market conditions and a steady reduction in the amount of favorable prior accident-year loss reserve development all contributed to the deterioration.
Direct premiums written for the medical professional liability insurers (MPL) composite was up 1.1% in 2020 to $7.9 billion, after increasing by 4.3% in 2019 and by 2.6% in 2018. This growth followed a prolonged period of soft market conditions and changing industry dynamics that dampened product demand.
The Past and Future for Medical Professional Liability Insurance
Given the decade of soft market conditions, loss cost inflation, declining reserve redundancies and the prolonged low interest rate environment, many MPL insurers adjusted their pricing over the last year. Capacity constraints in the most challenged sectors, including hospitals and nursing homes, have driven substantial rate increases. However, sectors of the physician MPL market remain quite competitive, the report says. Rate hardening is expected to gain further momentum in 2021 as unfavorable profitability trends persist.
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