Healthcare Town Hall

Since the late 1990s, a cycle generally familiar to the insurance industry has been playing out in the medical professional liability (MPL) market. During the late 1990s and early 2000s, insurers’ costs increased rapidly. By 2001, after a bit of a lag, insurers started increasing their pricing. Then, between approximately 2003 and 2007, claim frequency dropped significantly for a number of reasons—patient safety initiatives, tort reform, public sentiment, and others. Meanwhile, net earned premiums continued to rise, peaking in 2006.

While this was occurring, insurers continued to increase rates, in an effort to correct prior rate inadequacies. As a result, reserves built up, allowing insurers to ease up on premium prices. This set in motion a wave of declining prices, in a fiercely competitive market that continues to this day. The results, in terms of policy writing and profits, have been phenomenal on a calendar-year basis.

However, the price war has escalated to the point where reserve releases have become the primary undergirding of profits. Today’s stellar financials are possible only because insurers are still reaping the benefits of the earlier high prices, at the cost of reserves, which have been steadily declining in the most recent years. There is reason to believe that current pricing, geared to the competitive market but likely inadequate to sustain ongoing profits, will not work much longer.

To read the entire article written by Stephen Koca and Richard B. Lord, click here.

Reprinted from the Third Quarter 2012 issue of Physician Insurer Magazine, Physician Insurers Association of America. Copyright, 2012.

Liability medical professional liability, Richard B. Lord, Stephen Koca

Although the medical professional liability (MPL) industry is still reporting positive income results, a key measure of profitability has started to show signs of deteriorating, indicating that insurers have likely passed an inflection point in the market cycle.

Perhaps even more of a concern is that MPL insurers’ current profitability largely stems from policies written during the early to mid-2000s, when premiums more than adequately covered losses.

This article, published in Physician Insurer, reviews various negative factors that may disturb the MPL market and send prices higher.

Medmal medical professional liability, Rich Lord, Stephen Koca

National Underwriter picks up on the state of the medical professional liability insurance market in a new article by Richard Lord and Stephen Koca. Here is an excerpt:

Medical professional liability insurers are at a sweet spot in their underwriting cycle. For insurers, it’s a place where loss ratios are low, capital is plentiful—and in this case premiums, though under pressure, are only slightly off their peak.

But as any athlete knows, maintaining momentum is a tough proposition, and clear signs of a turn in fortune are already evident. They can be found in the somewhat overlooked corner of insurance known as loss reserves.

Read the full article here to better understand the challenge insurers face in maintaining this momentum.

Medmal medical professional liability, Richard Lord, Stephen Koca

The medical professional liability (MPL) insurance industry is currently enjoying an extended period of profitability, with ample capital and a near-record-low loss ratio. But legal and regulatory developments, along with the continued cycles in the market itself, could work to change the MPL situation. Understanding the effects of past underwriting results, claim frequency and severity, pricing, and investment income can provide valuable insights into what the future holds for the MPL industry.

Read the article from the Physician Insurer here.

Medmal medical professional liability, Rich Lord, Stephen Koca