For a second consecutive year, there has been a notable rise in the percentage of medical liability insurance premiums with a year-to-year increase, according to a new analysis from the American Medical Association (AMA) authored by José R. Guardado, PhD. It is based on data from an annual survey of professional liability insurers conducted by Medical Liability Monitor (MLM). "This appears to be the beginning of an upward trend in increases in premiums — a trend not seen in over 20 years," writes Guardado.
After years of fairly steady premiums, the percentage of "manual premiums" that increased year-to-year reached highs in 2019 and 2020 that have not been seen since the early 2000s. In 2018, 13.7% of premiums increased year-to-year. In 2019, the percentage was almost double that at 26.5%, and in 2020 it increased again to 31.1%.
In 2020, 25.9% of premiums increased less than 10% and 5.2% increased 10% or more. But the size of the increases varied widely by state. For example, in Nebraska 16.7% of premiums increased at least 10% year-to-year, and the size of the largest increase was 37.2%. In South Carolina 27.8% of premiums increased at least 10% year-to-year, and the size of the largest increase was 10.8%.
"The last hard market — also referred to as the liability crisis — took place about 20 years ago, in the early 2000s," writes Guardado. "It was characterized by dramatic increases in premiums. In 2003 and 2004, respectively, 77.4% and 82.1% of premiums increased from their levels in the previous years."
Following that period, the market softened and premiums started to decrease. But now, actuaries believe "we are already in the early stages of a hard market. Insurers have started raising premiums in response to deteriorating underwriting results, lower loss reserve margins, and lower returns on investment," he writes. "How severe the current hard market will become — how many premiums will increase and how high they will go is still uncertain."
It is important to note that the MLM reports "manual premiums," which does not reflect credits, debits, or other factors that may affect the actual premiums physicians pay. The MLM also reports on just on three specialties — obstetrics/gynecology, general surgery, and internal medicine. For more information, view the AMA report.
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