Best’s Market Segment Report: U.S. Medical Professional Liability Insurance Market Remains in Flux

OLDWICK, N.J.--(BUSINESS WIRE)-- The U.S. medical professional liability (MPL) insurance segment experienced a notable deterioration in underwriting results in 2019. The already dim prospects for the segment's profitability have been clouded by COVID-19, with uncertainties regarding impacts to loss costs as well as premium refunds and the ability to put planned rate increases into effect, according to a new AM Best report.

In its Best’s Market Segment Report, titled, “U.S. Medical Professional Liability Insurance Market Remains in Flux,” AM Best states that it is maintaining a negative outlook on the MPL segment, owing to the COVID-19 outbreak, along with concerns over rate adequacy amid rising loss costs and the impact of social inflation on litigation-driven loss severity trends in the wake of diminishing reserve redundancies.

The report notes the strain being placed on the health care system as COVID-19 spreads could lead to medical errors and other unforeseen situations and create a surge of litigation. Current sentiment toward health care providers, the difficulties of determining the standard of care in the current environment and immunity legislation could provide some protection from COBID-19-related litigation. However, these immunities have not been tested in the courts, and claims likely will come in years ahead.

In 2019, AM Best’s MPL composite saw its pretax and net operating income decline year over year by 71% and 63%, respectively, owing to a significant increase in underwriting losses. The deterioration in underwriting results was due primarily to a slight rise in underwriting expenses and loss and loss adjustment expenses and an 11% drop in net premiums earned, diminishing benefit from prior year loss reserve redundancies, as well as ongoing margin compression. The segment’s combined ratio deteriorated to 113.3 in 2019 from 102.3 in 2018.

A considerable amount of consolidation has taken place in the MPL segment in the last few years, and will likely continue. Technological advancements and innovation capabilities may become more appealing characteristics for potential acquirers that want to leverage technology without using the resources to build in-house. Alternatively, they may decide to form strategic partnerships with a university or healthcare insurtech firm, although integrating their systems could be another hurdle, depending on the type of technology acquired.

The MPL segment continues to face a very challenging and dynamic market. The long-term survivors will be those companies that can effectively use innovation to gain competitive advantages, find efficiencies and identify and react quickly to emerging risks.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=296614.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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David Blades, CPCU

Associate Director, Industry

Research and Analytics

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Sharon Marks

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Christopher Sharkey

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Jim Peavy

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Source: AM Best