Tag Archives: medical professional liability

Medical professional liability industry’s profitability declines while maintaining overall favorable results

Surplus grew slightly in 2015, leaving the medical professional liability (MPL) industry in a financial position roughly consistent with where it has been since the end of 2011. The increased capitalization and favorable operating ratios in the MPL industry of late have had one primary cause, the release of prior-year reserves. In 2015 in particular, reserve releases contributed 24 points to the industry’s operating reserves. The reserve releases are similar to those during 2014 and represent a decline relative to each of the years 2008 through 2013. Milliman consultants Chad Karls and Susan Forray provide more perspective in their recent Inside Medical Liability article.

2015 year-end results for medical professional liability specialty writers: Profits remain, while downward trends continue

Medical professional liability financial results for 2015 are telling a tale similar to the one told in 2014. For calendar year 2015, this segment of the casualty insurance industry can boast yet another healthy bottom line, but we should take note that declines in both the premium level and the amount of favorable annual reserve development appear to be taking their toll on overall net income. Total written premium during 2015 dropped by 4.4% when compared with 2014, making it the largest single-year percentage decline in premium since 2007-2008. Steadily declining premium levels have contributed to the erosion of the composite’s annual underwriting profit. The composite’s combined ratio reached 95% in 2015, its highest mark since 2005. Milliman’s Brad Parker and Eric Wunder provide some perspective in this article.

This article was originally published in the December 2015 issue of the Medical Liability Monitor.

How can big data reduce MPL litigation costs?

Defense costs are the greatest expenditure for many medical professional liability (MPL) insurers. Employing big data analytics may help MPL insurers control their litigation expenses more effectively. Milliman consultant Chad Karls provides perspective in his article “Big data analytics: A practical application for MPL insurers.”

Here is an excerpt:

The new and rapidly advancing science of big data analytics offers MPL insurers the opportunity to absorb the massive amount of legal invoice data as it is being reported, take a deep dive into it, and – with the help of sophisticated algorithms – quickly derive valuable insights that can be used to better understand and manage the claims process.

The result is precise, actionable information that insurers can utilize to evaluate and manage their defense strategies – even as cases are progressing from discovery to depositions, from the expert witness prep phase to trial and beyond….

So, once this data has been properly prepared and constructed, an MPL insurer is in a position to investigate the efficacy of its claims-handing strategies. Rather than relying on just intuition and judgment, which are often biased by one’s outlier and/or most recent experiences, we can allow the data to inform our strategies. We can answer questions like these:

• Is it an effective strategy to file a motion for summary judgment (MSJ) in a particular venue or with a particular judge, given our historical success rate? How much does it cost to file an MSJ?
• What is the average cost of an expert deposition and are we taking more of them now, or has the average cost per deposition increased, or both?
• What is the optimal lag between preparing our defendant for his or her deposition and the deposition itself, if any?
• Do we tend to get a better outcome when the lead attorney’s hours represent at least X% of the total hours spent on the case?
• How much does it cost to have our defense firms comply with our 90-day claim summary report, and does the compliance rate correlate with the outcome of the claim?
• Can we develop a more cost-effective strategy for our record retrieval and court reporting costs?

Third-quarter financial results for medical professional liability specialty writers

Through three quarters of 2015, the composite’s direct written premium level is roughly 5% below premium levels at the same point in 2014. The prolonged profitability enjoyed by the medical professional liability (MPL) market continues to be driven by low claim frequency, stable loss severity, and, most notably, large releases in prior coverage years, which is due to conservative reserving practices. With a projected 2015 reserve release exceeding $900 million, it appears the MPL market’s run of profitability will remain intact for the foreseeable future. Milliman’s Brad Parker and Chuck Mitchell provide some perspective in this article.

This article was originally published in the December 2015 issue of the Medical Liability Monitor.

A chain reaction

Previously, the medical professional liability (MPL) industry could afford to be less attentive to changes in the healthcare delivery system because the business of healthcare and practice of medicine had been very stable during the course of recent decades. That changed with the passage of the Patient Protection and Affordable Care Act, which created a chain reaction throughout the entire healthcare industry. The MPL industry is now responding to the broad effects of healthcare reform. Milliman consultant Susan Forray provides more perspective in this article.

This article was originally published in the October 2015 issue of the Medical Liability Monitor.

Midyear 2015 financial results for medical professional liability specialty writers

Aggregate direct written premium for the composite of medical professional liability (MPL) specialty writers continues its decline from a high in 2006 of $6.8 billion to $5.1 billion in 2014, a 26% decrease. Six months into this year, this trend is continuing, with direct-written premium down 4.7% from the same period in 2014. Despite the decline in net premium, robust competition, and historically low investment yields, MPL specialty writers continue to be profitable and continue to increase surplus levels. Net income for this composite is projected to approach $1 billion in 2015. But in the face of these positive overall results, pretax calendar-year underwriting and investment income are trending downward. Milliman consultants Brad Parker and Chuck Mitchell provide some perspective in this article.

This article was originally published in the September 2015 issue of the Medical Liability Monitor.