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Market at a turning point as consolidation continues
How's this for a play on words?: Agents and brokers who specialize in selling medical professional liability (MPL) insurance may have to start focusing on selling professional liability insurance to medical practitioners.
This observation is more than semantic jiu-jitsu, as consolidation among healthcare providers has contributed to a decline in premium and profitability for MPL coverage since the mid-2000s. At the same time, healthcare practices face growing exposure to other types of professional liability, especially for cyber security and the handling of sensitive personal information.
"Changing healthcare delivery systems require insurance carriers to be flexible and understand complex healthcare market needs," says Caroline Clouser, executive vice president of Chubb Healthcare. "Carriers must continue to refine and enhance coverage to provide a multiline approach that helps protect against coverage gaps and cover a wider variety of risks."
The delivery of healthcare in the United States is being transformed as physicians and other medical professionals increasingly opt to work as hospital employees or partners in large practices that often self-insure or utilize captives for medical liability coverage.
According to the American Medical Association (AMA), 51% of physicians owned their own practices in 2014, down slightly from 53% in 2012 and well below the figure for 1983, when 76% of physicians owned their practices. At the same time, the percentage of physicians employed by hospitals or practices owned wholly or in part by hospitals rose from 29% in 2012 to 33% in 2014.
That trend leads to a relative decline in the number of independent practices purchasing traditional medical professional liability (MPL) coverage.
As a result, consulting actuaries at Milliman, Inc., project that direct written premium for MPL insurance will fall for the 10th straight year in 2016, from a peak of $6.7 billion in 2006 to $4.8 billion in 2016. Net income has seen an even steeper decline, from $1.8 billion in 2006 to an estimated $643 million in 2016.
Soft market
"The market is very soft," says Rob Francis, COO of The Doctors Company, Napa, California, the nation's largest physician-owned MPL insurer. "This arises from a decrease in premium over the past 10-12 years and a long decline in claims frequency, which is down 50% -...