Challenging Times Ahead for the Medical Professional Liability Sector

Q&A with MLMIC’s Chief Actuary Thomas Ryan reprinted from MLMIC’s Third Quarter 2021 issue of The Scope: Medical Edition

The financial rating agency AM Best issued a report last spring (“Continued Uncertainty Clouds the Horizon for MPL Insurers“) indicating that, due to a myriad of factors, 2020 marked the sixth consecutive year of underwriting losses for medical professional liability (MPL) insurers.

Citing the continued pressures of depressed demand, concern over rate adequacy, rising claim cost trends due to social inflation (i.e., changing societal attitudes) and diminishing reserve redundancies, along with the potential for an increase in claims frequency owing to the pandemic, the report stated that it maintains a negative market segment outlook on the MPL insurance market sector.

To help our readers gain an understanding as to what these medical professional liability market challenges mean for not only MPL insurers such as MLMIC, but for purchasers of MPL coverage as well, we have posed relevant questions to Thomas Ryan, MLMIC’s Chief Actuary.

Q: Given the concerns stated in the AM Best report, in your opinion, what impact do you feel these factors will have on the New York MPL marketplace in the short- and long-term, as well as for MLMIC and its Insureds?

A: The MPL insurance marketplace is diverse and varies widely between states based on legislation, regulation and market competition. In New York, protection for healthcare providers can be provided by commercial insurance entities, including admitted insurers (those regulated by the New York Department of Financial Services, or DFS) like MLMIC and nonadmitted insurers such as risk retention groups, which are not regulated by the New York DFS. Coverage for MPL claims can also be provided through self-insurance, which is usually employed by large physician groups or hospital systems. In their role as a financial rating agency, AM Best’s report focuses on the commercial insurance market. But many of the concerns raised, such as rising claim costs and the potential increase in claims frequency, could impact self-insurers as well.

Despite these concerns and the overall negative outlook for the MPL sector, New York should have a competitive MPL insurance marketplace for the foreseeable future. While New York’s numerous competitors in the market will ensure there is insurance availability to healthcare providers, these providers will likely pay more for this protection due to greater claim frequency and rising costs. Insurance rates for healthcare providers are based on analyses of both the number of claims made against providers and the cost to defend and settle these claims.

The number of MPL claims reported in New York has been relatively flat in recent years, but higher than expected settlement amounts have resulted in many insurers raising the rates they charge. For admitted carriers such as MLMIC, physician rates are set by the DFS based on its view of the loss experience for the marketplace and individual insurers. Nonadmitted insurers are not subject to regulation by the DFS and can readily implement large rate increases for providers when faced with new claims or large settlement amounts on existing claims.

Q: Do you think the COVID-19 pandemic will have a dramatic effect in either direction on the future costs and availability of insurance in the overall MPL marketplace?

A: Due to the recency of the pandemic and the long delay in reporting and settling most MPL claims, there is still a great amount of uncertainty as to the impact of the pandemic on insurer loss experience and the resulting insurance rates and availability. While there were reduced volumes of care and limited immunity provisions in place during the peak of the pandemic, which would tend to lower future claims, there are also concerns over more severe MPL claims resulting from delayed treatments and diagnoses. Additional uncertainty results from court closures and delays due to the pandemic, which have limited opportunities to resolve reported claims.

In the long term, the insurance marketplace will be impacted by the pandemic more from changes to the practice and business of medicine rather than by any resulting claims. As noted by AM Best, the decrease in the volume of care resulting from the pandemic resulted in the acceleration of several trends, such as the retirements of older physicians and the consolidation of individual practitioners and smaller groups into larger entities, which will result in depressed demand that may never be replaced. Also, telehealth, with its own unique risks, played a large role during the pandemic and will likely continue, resulting in insurers addressing any possible telehealth coverage concerns from insureds.

Q: Are MLMIC’s finances sufficient to withstand the anticipated challenges that lie ahead for MPL insurers?

A: MLMIC is the largest writer of MPL insurance in New York and has maintained this market leadership position for over 45 years. Recognizing its quality and stability, MLMIC was acquired by Warren Buffett’s Berkshire Hathaway in 2018. As part of Berkshire Hathaway, MLMIC has enhanced financial strength and recently received an A+ rating (Superior) from AM Best. MLMIC is ready to meet any medical professional liability market challenges.

Q: What actions can healthcare providers take to help temper claims in order to keep rates more stable?

A: Perhaps the most valuable tool that healthcare practitioners can avail themselves of in this regard is the completion of effective risk management courses, such as those offered by MLMIC. These ongoing courses offer useful insights on identifying current liability issues and claim trends, while also providing risk management strategies to help prevent suits and claims. Beyond this, MLMIC’s Claim Data Analytics program identifies loss drivers pertinent to a given organization, specialty or region. Healthcare providers can work with MLMIC Risk Management Consultants to mitigate identified risks and improve quality of care and patient outcome, thereby reducing liability exposure.

Q: The AM Best report cited that “given the liability uncertainties of today, innovation is becoming more important for MPL insurers.” What has MLMIC done to adhere to this observation?

A: MLMIC has always been sensitive to the challenges faced by our customer base. The Company has developed several exciting new programs aimed at identifying and addressing the needs of our policyholders during this time of change and uncertainty. From our existing, well-respected risk management programs to the implementation of our Preferred Savings Programs and our latest SILO insurance program, which was designed to provide comprehensive protection for employed physicians, MLMIC continues to monitor and quickly react to changes in the industry.

SILO offers solutions to these challenges through flexible coverage options, direct risk mitigation reviews, detailed claims data analytics and a team of dedicated professionals with unparalleled experience to guide any health system through the many managerial and financial uncertainties that exist in today’s practice environment. The SILO solution is built upon a foundation of strong collaboration and the desire to jointly achieve early resolution of incidents, claims and lawsuits.

Thomas Ryan is a Senior Vice President of Analytics and Chief Actuary with MLMIC Insurance Company. This Q&A was originally printed in MLMIC’s Third Quarter 2021 issue of The Scope: Medical Edition. A preview of the publication is available here.