Hospitals that self-insure their professional liability and workers’ compensation coverage should keep an eye on the general rate of inflation. This dynamic is explored in an article in the latest issue of P&C Perspectives: “Estimating the impact of claim inflation on self-insured liabilities.” Here is an excerpt:
For some coverage typically self-insured by hospitals such as professional liability and workers’ compensation, the average time to payment after a claim is reported or incurred is several years. Therefore, the impact of an increase in the claim inflation rate for liabilities for these coverages can be highly leveraged…For example, for professional liability claims, a 1% increase in inflation can lead to liability increases of more than 4%. But, for workers’ compensation claims, a 1% increase in claims inflation can result in increases of more than 10% in the outstanding liabilities.