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Survey Report

Insurance Marketplace Realities 2021 – Health care professional and general liability

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November 18, 2020

The impact of the hard market and pandemic is still reverberating in the HPL/GL marketplace. Every aspect of insurance is under review and subject to change.

Rate predictions

Rate predictions: Health care professional and general liability
  Trend Range
Hospital medical malpractice: Increase (Purple triangle pointing up) +5% to +25%
Allied health medical malpractice: Increase (Purple triangle pointing up) +5% to +15%
Physicians medical malpractice: Increase (Purple triangle pointing up) +3% to +15%; particularly venue dependent
Loss-affected accounts: highly variable rate increases

Key takeaway

The double impact of the hard market and the global pandemic is still reverberating in the HPL/GL marketplace. Due to the resulting underwriter response toward conservatism, every aspect of insurance is under review and subject to change: rate, capacity and coverage.

Hard market: the numbers

  • Catastrophic industry losses, both single-plaintiff and batch, have resulted in unsustainable medical malpractice loss ratios that have been north of 100% since 2015.
  • Rates have been rising in most segments of health care since at least late 2018 and will continue to rise into 2021. Rate changes depend on several intersecting variables related to the overall market, the subsegment of health care and individual account characteristics.
  • Minimum premiums are starting to rise but vary greatly from insurer to insurer; those minimums generally seem to be settling somewhere between $5K to $7.5K per million.

Hard market: the capacity

  • Several insurers withdrew from the medical malpractice market in the summer of 2020, including two major players. In one case another carrier bought renewal rights, while in the other case the rights are not for sale.
  • Most insurers have reduced the capacity they are willing to deploy on any one account to no more than $10 million. Those insurers that are willing to deploy more than $10 million typically do so at increased rates.
  • Self-insured retentions and deductibles are increasing, both on a per-claim/occurrence basis and in the aggregate (where applicable).
  • There are signs that investors are identifying an opportunity due to the limited capacity; at least one startup in the medical malpractice space has been announced this year.

Hard market: the coverage

  • Driven by attention-grabbing headlines about opioids, sexual abuse and COVID-19, carriers are still apprehensive about systemic risk (i.e., risks that span the industry), driving a variety of consequent limitations in coverage
  • A full spectrum of COVID-related limitations and exclusions have been developed by the market. These limitations are not typically imposed on facilities that offer direct patient care; exceptions to this arise for buyers involved with high-profile COVID-related issues or COVID-related batches.
  • Several insurers have been reviewing their batch coverage guidelines and are expected to approach this coverage with increasing conservatism. The main area of focus remains the mechanism for batching claims (i.e., what claims are related).

Hard market: underwriting guidelines

  • Underwriters in London, Bermuda and the U.S. are overwhelmed with increasing volumes of submitted business as clients seek capacity from every corner of the marketplace.
  • Current hard market conditions are characterized by insurers looking to return to underwriting profitability. This deemphasis on growth (top line) has led to greater selectivity and rigorous application of underwriting guidelines.
  • Underwriting guidelines are in a state of fluidity as insurers respond to the pandemic while simultaneously trying to understand and analyze its impact on their portfolios.
  • Underwriter authority in the field has been reduced (or withdrawn) for certain types of coverage or classes of risk, resulting in greatly lengthened renewal timelines.

What’s coming?

  • Upcoming 1/1 treaty reinsurance renewals will play a pivotal role in insurers’ go-forward approach to capacity, coverage and rate.
  • Recent focus on social justice ideologies and long-overdue attention to health disparity may start to impact this space, as data providing evidence of disparate health outcomes becomes increasingly available.
  • The ongoing digital transformation of health care continues to drive concerns about cybersecurity and privacy. One thing we can be sure of: operational, financial and clinical unknowns will arise from the ongoing explosion of digital health models.
  • Insurers are struggling to quantify the short-term and long-term impacts of COVID-19 on their entire portfolio including their medical malpractice book; immunities are fragmented state by state and untested, offering limited safe harbors from litigation.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.

Contact

Kirsten Beasley
Head of Health Care Broking, North America

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