Risky Business Health-Care Boom Offers E&S Opportunities

Copyright 2009 The National Underwriter Company All Rights Reserved Florida Underwriter's Magazine

May 2009

FEATURE STORY; Pg. 33 Vol. 26 No. 5

798 words

Risky Business Health-Care Boom Offers E&S Opportunities

By Tom Murphy; Tom Murphy is vice president of Quaker Special Risk in Eatontown, N.J. Quaker Special Risk is a wholesaler and MGA with a specialty division placing health-care related professional liability risks. He may be reached at [email protected]

Even with the economy in a tailspin and a soft insurance market, there is one area where agents and brokers can find premium and income growth in 2009.

The health-care facilities and services industry currently accounts for over 16 percent of the nation's gross national product, with growth expected to nearly 20 percent by 2017. Combined with anticipated spending growth of nearly six percent a year, health care may prove to be a welcome port for agents in this economic storm.

Although hospital spending is expected to decrease slightly, outpatient facilities and services and home health-care agencies are projected to see dramatic growth. Fueling that growth are emerging medical technologies, a youth-oriented society intent on delaying "aging effects," and society's increased overall emphasis on good health and physical well-being.

The exposures association with this wealth of new products, services and options make these risks perfect candidates for placement in the excess and surplus (E&S) lines market. The E&S market is always the first to insure such unusual, highly technical or invasive risks. MRIs and bariatric surgery, now standard procedures, were considered too risky for standard coverage when first introduced; they found protection with E&S insurers.

E&S and specialty program markets thrive on new or emerging products, fringe or alternative treatments, new specialties or businesses, and highly technical or invasive medical procedures not yet accepted by traditional insurance. The E&S market also addresses the coverage needs of allied health-care risks such as imaging centers, nurse staffing, home health care, laboratories, emergency transport companies, substance abuse screening, and the like. Exposure Grows With Business

Changes in how we live as a society also have impacted our expectations in regard to health-care delivery systems. In the past, doctors and hospitals provided most health care in a traditional setting. But procedures and treatments have gradually been moved to outpatient centers, satellite practices and, in one of the newest business innovations, combination clinic-spas.

Spas generally specialize in beauty and pampering services such as facials and massages. But when ambitious physicians look for additional income, a medi-spa is born. Medi-spas offer services such as injections to smooth out facial wrinkles, chemical peels and microdermabrasion, laser hair removal, permanent makeup, and spider-vein elimination. These treatments have become so widely accepted that they and other non-surgical procedures now account for 78 percent of all cosmetic surgery nationwide, according to the American Society for Aesthetic Plastic Surgery.

Many of the procedures, however, are invasive, requiring sterile needles and a skilled hand. Associated risks include burns, scarring, allergic reactions to topical anesthesia, claims of non-informed consent, and unrealistic expectations of the results. Proper insurance coverage is essential. New Products, New Techniques

The number of clinical trials also is growing, driven by advancements in medical science and medical technology and governmental demands for rigorous testing to validate patient safety and efficacy. General and professional liability coverage is called for throughout these testing processes.

Professional and product liability coverage, stand-alone or in combination, is available for most type of risks associated with clinical trials and life sciences. Because side effects from untried substances may not show up until five years after the trial, the testing agency may also need occurrence-liability coverage. The E&S market offers coverages for the organization, company or individual associated with carrying out the trials.

Advances in transplant surgery and sterilization techniques have led to more replacement procedures and more uses for harvested parts. Ground bone, for instance, is now used to produce bone cement. And blood is separated into its components and used in new medical procedures.

The E&S and specialty market covers companies that harvest and store human organs, tissues, stem cells and cord blood, as well as those that manufacture or produce vaccines, implants, vitamins, diagnostics, blood plasma, animal drugs, laser systems, surgical dental or analytical instruments, and a variety of other medical devices and pharmaceuticals. In addition to product liability, surplus lines carriers provide professional and general liability for individuals who advise on product use.

The emerging trends we see in health care are only the tip of the iceberg. This field will continue to change dramatically and offer services that we are not even contemplating yet. But for each challenge, the surplus lines and specialty marketplace will deliver the solution.

May 11, 2009