Marketplace Realities 2018: Health care professional liability

November 6, 2017

    The one thing

    Although this line has become less profitable, most segments remain very competitive for renewal proposals
  • Health care professional liability (HPL) continues to be a very competitive line despite the industry combined ratio creeping over 100 for the first time in 10 years. Competition and the strong capitalization of HPL insurers will keep pricing low for almost all health care industry buyers across all segments, with one notable exception: long-term care for buyers with unfavorable loss experience and in certain locales.
  • Long-term care is the one segment where buyers should prepare for changing market conditions. Several carriers have withdrawn from this segment, while many others are seeking rate stabilization and/or tightening terms and conditions on new business and renewals. Loss trends have deteriorated in recent years with some increase in severity and frequency, particularly in tough legal venues. Buyers with adverse loss experience and in unfavorable jurisdictions may face nonrenewal or significant adjustments in rates and deductibles/retentions. Despite these trends, capacity remains sufficient, with new market entrants and certain insurers expanding their footprints. Buyers with favorable loss experience and in favorable legal jurisdictions have generally seen renewals within the range of flat to +5%.
  • Otherwise, competition within this line has continued to be fierce, especially for the hospital and physicians/group segments, as there are fewer buyers every year due to hospital consolidation, physician employment by hospitals, and physicians forming large groups in order to remain independent of hospital control.
  • Price prediction

    Flat to low double-digit decreases
  • We expect the HPL market to remain soft into 2018, with flat to low double-digit decreases for typical renewals, depending on loss experience, exposures and territory. Loss frequency remains low and, while severity is increasing, it is actuarially predictable. The number of large verdicts and settlements, however, should continue to be watched, as it is one of the industry’s few negative factors and is contributing to the worsening combined ratio.
  • Buyers may need to adjust terms and conditions to address evolving risks, such as batch claims, cyber/network privacy risk, regulatory risk and executive risks. More carriers are willing to write integrated programs with excess coverage layered over some of these risks as well as auto, general liability and crime/fiduciary coverages. A number of hospital excess carriers are offering multiyear programs.
  • An emerging concern with respect to excess/umbrella coverage — for academic institutions in particular — is the attempt by some insurers to impose a traumatic brain injury exclusion. The target is mostly schools with contact sports programs. For an academic medical center this may be a point of negotiation.
  • Beyond hospitals, the competition for physicians/groups and miscellaneous facilities has
    helped lower premiums.Carriers are concerned about cyber/network privacy risk bleeding into the health care professional liability. Carriers are seeking to limit potential losses with exclusions and other coverage limitations.