Trouble has been brewing in the medical malpractice arena for years. Business partners of mine on both the carrier and retail agent side who have been focused on this product line for most or all of their careers tell me they feel a turn in the market is imminent. I believe they are right.
If you are a retail agent with a sizable book of medical professional liability placements, consider the following:
- The average combined loss ratio for medical malpractice liability insurance in the U.S. is expected to move above 100% in 2014 for the first time since the last soft market.
- Continued merger and acquisition activity in the physician space continues to drive significant reductions in medical professional liability premium volume for carriers nationwide (see my blog article “Decreasing Physician Practice Ownership – A New Paradigm” for more information on this topic).
- Medical professional liability loss reserve redundancy is projected to be virtually depleted in 2014, eliminating a financial cushion that has bolstered carrier profitability for years.
In short, we are currently in an environment where carriers are generating less and less medical professional liability premium. What they can write is now likely being written at an underwriting loss and they can no longer bolster profits by taking down reserves. As if this weren’t enough, in November of this year there is a very real possibility of a dramatic increase in the cap for non-economic damage awards for medical malpractice suits in California. If this happens the impact on medical malpractice across the U.S. will likely be significant.
Like it or not, change is coming.
What does it mean? If history is any indication, for retail agents with sizable books of medical professional liability change means a significant increase in the number of insureds placed with surplus lines policies as well as changes in premium volume and commission revenue created by those placements. It also means underwriters will be much more selective about the risks they’ll put on their books. They will also look to scale back significantly on various coverage issues.
Most of us who went through the last ‘hard market’ for medical professional liability insurance remember it for what it really was – a period of time when chaos reigned, E&O exposure was dramatically elevated, and getting the job done right, promptly and as easily as possible for customers was extremely difficult. An increase in commission revenue will be welcome, but a hard market is not fun.
If you are a retail agent with a sizable book of medical professional liability you may need to upgrade your wholesaler. Now is the time when it is easiest for your wholesaler to get you what you need, when you need it, for your healthcare clients. If your experience with your wholesaler now is “just OK”, how can you expect anything but an unsatisfactory experience when things get really tough? To put it another way, when your current surplus lines book containing a small number of non-standard physicians, which currently represents only 1% of your revenue, then quickly turns into 30 non-standard physicians and a long list of medical facilities representing 25% of your revenue, you’ll want to be sure you are working with the right wholesaler!
Now is the time to consider a change. Give Ethos a call.
David is Ethos’ Co-Founder and Chief Production Officer. He has decades of experience in the insurance industry during which he has played many roles, including that of a contract writer for a reinsurance brokerage firm, a management liability underwriter and, over the past 20 years, a wholesale broker focused exclusively on the healthcare professional liability (HPL) space. As a true HPL specialist David possesses a comprehensive understanding of professional liability exposures in the healthcare industry and is well-versed in the products and capabilities of Ethos’ numerous carrier partners. His role at Ethos includes supporting production support staff in their effort to efficiently solve HPL-related problems for retail customers, mentoring Ethos’ business development staff and working to develop and maintain relationships with carrier business development staff and underwriters. Personally, David enjoys building things, whether they be home projects or business ventures. He also enjoys sharing good food and good wine with friends and family. David looks forward to continuing to build Ethos and serving retail customers for years to come.
