Based on medical malpractice trends we’ve monitored throughout the past year, our predicted outlook for 2024 is for many of those trends to continue. There are no surprises — Costs will continue to rise, technology will play a bigger role and the market will continue to consolidate. As they have with cyber liability insurance, insurers will place more importance on risk management, to reduce the risk of claims.
Here are our top five predictions for trends in medical malpractice insurance for 2024:
- Insurance rates will continue to increase.
- Insurers will focus on risk management to prevent claims.
- AI will play a greater role in underwriting and claims processing.
- Healthcare providers will increasingly turn to alternative risk structures.
- The medical malpractice insurance market will continue to consolidate.
1. Insurance premiums will continue to increase
There are a number of reasons why insurance premiums will rise this year, the main ones being the increased cost of litigation:
- Increased Payouts for Claims:2023 saw multiple jury awards of over $25 million1 made to plaintiffs in medical malpractice cases, with an overall rise in the amounts awarded. The average medical malpractice payout in 2023 across all states was around $500,0002 .This average has been steadily rising and will continue to contribute to higher premiums.
- Rising Legal Defense Costs: The cost of legally defending malpractice claims is also on the rise. Legal fees, expert witness costs, and other related expenses contribute to the overall cost of a claim, which in turn affects insurance rates.
- Inflationary Impacts: General economic factors, such as inflation, affect the cost of insurance. As the cost of providing healthcare services increases, this also drives up the costs associated with medical malpractice claims and insurance.
- Technological Advancements and New Medical Practices: Advances in medical technology and new medical practices can introduce new types of risks, which may prove challenging to insure. As the medical field continues to evolve, insurers must constantly adapt, adjusting rates as they do.
- Regulatory Changes and Legal Environment: Changes in laws and regulations, as well as shifts in the legal environment, can impact the medical malpractice insurance market. For example, the 2022 Pennsylvania supreme court ruling which removed restrictions to venue shopping, will continue to influence the price of premiums in that state.
- Patient Expectations and Litigious Trends: An increase in patient expectations and a more litigious society can lead to more claims being filed. This increase in the frequency of claims will also put upward pressure on insurance rates.
2. Insurers will focus on risk management
We have seen this trend in 2023, particularly with cyber liability insurance, where in
surers like CFC implemented aggressive risk management services including deep scanning of customer systems to identify vulnerabili
ties, as well as immediate technical support for cyber incidents. It makes sense that carriers would extend this approach to other insurance products, particularly medical malpractice.
Insurers are also likely to conduct more thorough underwriting to better identify and assess potential risks before issuing a policy. This may include conducting site visits to assess the provider’s practice environment.
Here are some specific ways in which insurers may focus on risk management in 2024:
- Requiring healthcare providers to implement patient safety initiatives, such as using checklists and protocols to prevent errors, and providing training to staff on how to identify and report potential risks.
- Insurers may offer risk management consultation services to help healthcare providers identify and mitigate risks. These services may include providing training on patient safety initiatives, conducting risk assessments, and developing risk management plans.
- Insurers are increasingly using data analytics to identify trends and patterns in medical claims data. This information can be used to identify high-risk providers and develop targeted risk management interventions.
- Investing in technology to improve risk management capabilities, including software that can better identify and track potential risks, as well as data analytics tools that can be used to analyze claims data.
- Requiring clients to implement electronic health records (EHRs): use checklists and protocols can help to prevent errors; ensuring staff are properly trained to identify and report potential risks and conducting regular risk assessments:
By implementing these risk management strategies, insurers can attempt to reduce the number of medical malpractice claims, helping to contain further cost rises in medical malpractice insurance.
3. AI will play a greater role in underwriting and claims processing
Artificial intelligence (AI) is expected to play a significant role in the move to technology for medical malpractice insurance in 2024. AI can be used to automate many of the tasks involved in underwriting and claims processing, which can help to reduce costs and improve efficiency. AI can also be used to identify trends and patterns in claims data, which c
an help insurers to identify high-risk providers and develop targeted risk mana
Here are some specific ways in which AI can be used in medical malpractice insurance:
- Underwriting: AI can be used to review medical records, identify risk factors, and assess the overall risk of a provider. This can help insurers to make more informed underwriting decisions and to price policies more accurately.
- Claims processing: AI can be used to review medical records, identify potential claims, and assess the likelihood of a claim being successful. This can help insurers to process claims more quickly and efficiently, and to reduce the number of fraudulent claims.
- Risk management: AI can be used to identify trends and patterns in claims data, which can help insurers to identify high-risk providers and develop targeted risk management interventions. AI can also be used to develop predictive models that can be used to predict the likelihood of a claim, which can help insurers to allocate resources more effectively.
By increasingly using AI, insurers can improve their assessment accuracy and risk management capabilities, improving their risk exposure in the marketplace.
4. Healthcare providers will increasingly turn to alternative risk structures
As insurance premiums continue to rise and carriers place more restrictions on healthcare providers, more will probably turn to alternative risk structures in an effort to better manage their medical malpractice insurance costs. These are non-traditional insurance arrangements that allow healthcare providers to share or retain a portion of the risk of medical malpractice. This allow providers to lower their premiums and to better manage their risk.The most common alternative risk structures used by healthcare providers are:
- Captive insurance companies: Captive insurance companies (captives) are owned and operated by healthcare providers. They allow providers to self-insure their malpractice risk, which can save them money and provide some continuity on premium costs. Captives range in size and complexity, from large Single Parent Captives to smaller Micro Captives; and jointly-funded Group and Protected Cell Captives.
- >Risk retention groups (RRGs): RRGs are groups of healthcare providers that pool their malpractice risk together. This can help providers to spread their risk and lower their premiums.
- Self-insured retention (SIR) plans: SIR plans allow providers to retain a portion of their malpractice risk themselves. This can help providers to lower their premiums, but it also increases their exposure to risk.
- Loss-sharing arrangements: Loss-sharing arrangements are agreements between healthcare providers and insurers to share the cost of malpractice claims. By increasing their share of risk exposure, healthcare providers can lower their premiums and secure insurance in difficult markets with hesitant carriers.
The use of alternative risk structures will also encourage healthcare providers to place more emphasis on assessing the risks they face and implementing strategies for risk mitigation. As they will be directly involved with court action, they are also likely to stage a more robust defense against claims, which will in turn discourage predatory lawsuits.
5. The market will continue to consolidate
A number of consolidations that have taken place in the medical malpractice insurance market in recent years, with large international players like Tokyo Marine, Munich Reinsurance Group and Envision Healthcare acquiring smaller Carriers. This consolidation is expected to continue in 2024 as insurers look to gain economies of scale and improve their profitability.Some of the reasons for this consolidation are:
- Increasing competition makes it difficult for smaller insurers to compete. Consolidation can help insurers to achieve the scale they need to compete effectively and to lower their operating costs.
- The rising cost of medical malpractice claims. Consolidation can help insurers to pool their resources and to better manage their risk of large claims.
- The ability to develop new products to meet the evolving needs of healthcare providers, such as telemedicine insurance and insurance tailored to the specific needs of high-risk providers like surgeons and anesthesiologists.
Consolidation is a major trend in the medical malpractice insurance market and It is expected to continue in the years to come as insurers look to gain economies of scale, improve their profitability, and meet the changing needs of healthcare providers.
What this means for insurance brokers and agents
While rate rises will increase commissions for brokers and agents, higher premiums can lead to more challenging renewals and the necessity for agents to provide additional value through services and expertise. We will continue to expand our expertise in risk management strategies, so we can advise healthcare providers on how to implement these practices.
The integration of AI into underwriting and claims processing will likely streamline these processes, making them more efficient. This could mean quicker service times and potentially more accurate underwriting decisions, however, it also necessitates staying informed about technological advancements and possibly adjusting our business models to align with these new AI-driven processes.
Alternative Risk Structures are something that we have specialized in for a number of years, so the Westwood team understand these mechanisms thoroughly. We are adept at advising clients on whether such structures are appropriate for their specific situation, so this opens up new opportunities for agents working with the Westwood Insurance Group.
The continued consolidation of the medical malpractice insurance market makes it more important for us to keep up-to-date with the offerings of the different carriers. Maintaining strong relationships with a variety of insurers becomes increasingly important, so we always have the best available options to offer our clients.
Overall, these trends are good news for brokers like Westwood Insurance Group as we continually enhance our expertise in risk management, stay abreast of technological advancements, leverage our expertise in alternative risk structures, and maintain diverse insurer relationships. It is also good news for commercial agents who work with us.
Together, we can confidently look forward to a prosperous new year.
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Westwood have fostered exceptional relationships with underwriters and we go to great lengths to keep abreast of their latest products, changes in requirements and restrictions, including having weekly calls with the carriers, which you can see here, by joining our insurance insider group.
- Professional Liability Insurance (Medical Malpractice Insurance)
- General Liability Insurance
- Business Owner’s Policy (BOP Insurance)
- Excess and umbrella coverage
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- Telemedicine Malpractice Insurance
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Westwood President, Michael Richards has extensive experience in setting up alternative structures for larger clients. Here are some examples:
- Starting a Single Parent Captive (Pure captive)
- Joining a Protected Cell Captive (Segregated Cell)
- Micro Captive Insurance
- Group Captive Insurance
- Risk Retention Group (RRG)
- Special Purpose Vehicle (SPV) Captive
- Stand alone ERP (extended reporting period)
- Loss Portfolio Transfers (LPTs)
If you think your client could be large and stable enough to benefit from starting or participating in a captive or has a special need for another alternative structure, contact Michael Richards now by phone: 855 351 7487.