The Current State of the Medical Malpractice Market

In the late 1960s and 1970s, the country went through a medical malpractice insurance crisis. Policy premiums weren’t high enough to keep up with skyrocketing payouts, and many carriers went under or left the market. After recovering from that crisis (and another smaller one in the 1990s), the market has remained relatively stable, with periods known as a “soft market” – where premium rates decrease – or a “hard market” – where rates increase.

Today, after more than a decade of soft-market pricing, there are indicators that the medical malpractice segment is transitioning back to a hard market. According to the Medical Liability Monitor Annual Rate Survey, more than 25% of medical professional liability (MPL) insurance premium rates increased in 2019 – the first time that’s happened since 2006.

This is partly due to increasing claims frequency and severity. A recent analysis found the average cost of a medical malpractice claim in the U.S. has risen by 50% since 2009. What’s more, payouts of above $5 million have increased sharply since just 2015.¹

The medical malpractice insurance market is also being impacted by changes within the healthcare industry itself. In its March 2019 review of the segment, A.M. Best noted the consolidation of physician groups, growing presence of private equity and hospital employment of physicians are shrinking the premium base.² The American Medical Association found that in 2018, for the first time ever, there were fewer physician owners than employees.³ With less money coming in to cover the same or growing risk exposures, insurers are forced to raise rates to be able to cover claims.

To counter these trends, some MPL coverage providers are focusing on overcoming the tort reform challenges that exist in many states. Others are expanding their coverage offerings beyond healthcare or forming partnerships to expand their geographic reach. A.M. Best believes, however, that the MPL insurers most likely to maintain long-term success are those that innovate effective new ways to identify, price and avoid risk, improve efficiencies and gain competitive advantages.

Note: every market is different. The national trends mentioned above may not be representative of what’s happening in your area. Ask your agent if they can provide additional insight regarding your local market conditions.

1. Beazley, Aon. Aon/ASHRM Hospital and Physician Professional Liability Benchmark Study, November 2019.
2. Best’s Market Segment Outlook: U.S. Medical Professional Liability, March 2019.
3. American Medical Association Policy Research Perspectives, July 2019.