Property & Casualty
For many healthcare organizations, 2022 was a financially difficult year due to the labor shortage, unpredictable volumes, and higher cost of services. These issues will likely continue in 2023, and healthcare organizations will have to make decisions about services provided to remain viable in the future.
The effect of the healthcare labor shortage is being closely monitored by the markets as it is unclear how it will impact the provision of care, financial viability of organizations, and future claim activity. Additionally, inflation has been affecting all facets of life, and healthcare is in no way immune to this.
Healthcare consolidation continues at a steady rate. For the first time, healthcare mergers and acquisitions activities exceeded $200 billion in 2021. We see private practices merging or being acquired by larger healthcare organizations or private equity investors. Independent and regional hospitals are getting acquired by larger healthcare systems. The impact of consolidation on quality of care and overall costs for consumers continues to be a concern.
The severity of professional liability claims continues to increase due to social inflation and the rise of nuclear verdicts. Carriers continue to be concerned about the uncertainty surrounding the court systems and COVID-19 claims as well as the future impact inflation has on medical expenses.
Pending bills and changes to laws in certain jurisdictions (the venue shopping rule in PA, MICRA in CA, and the Dobbs Supreme Court Decision) are being closely monitored to determine if and how they may impact healthcare providers and the insurance marketplace.
Professional liability (except physician medical malpractice) rate increases are beginning to taper off, but the increased severity of claims and certain venues continue to impact the availability of excess capacity.
The physician medical malpractice market continues to see hard market conditions throughout the country. Rate increases up to 15% are expected to continue in 2023. Admitted markets are taking more conservative stances and are non-renewing poor performing risks. As a result, the excess and surplus lines market is being accessed where rates are typically higher, and terms are more restrictive.
Underwriters are focused on adequacy of values and are closely reviewing capacity, terms/conditions, and deductibles. Carriers are looking at reducing CAT peril limits due to recent severe weather events and are proposing increased deductibles.
Healthcare auto continues to be a challenging line of business, particularly when clients have emergency vehicles, or a significant non-owned exposure exists. Many underwriters will not offer auto without a supporting line of business which is why auto is often placed with property with the same carrier.
Cyberattacks and coverage will continue to be a major concern for the healthcare industry, which necessitates a continued focus on thorough underwriting and cyber hygiene. Underwriting questions continue to evolve, based on developing issues or cyber related claims. Premium increases, retention increases, and coverage restrictions are expected for 2023 but not at the same level as the past two years. Coverage limitations are added if proper IT cyber controls, especially multi-factor authentication (MFA), are not in place.
Workers’ compensation premium may be affected as healthcare systems increase salaries to retain employees; however, to date we are continuing to see relatively flat renewal rates and even small decreases on good risks.
- Fiduciary Liability
Carriers continue to review and increase mass class retentions, due to ongoing excessive fee concerns.
- Directors & Officers and Employment Practices Liability
Rate increases are tapering off, however there is still an emphasis on financial solvency and carriers will thoroughly review financials and ask more questions. Some healthcare segments continue to see reductions in sublimits (i.e., regulatory/antitrust) and increased retentions.
Managed Care Errors & Omissions
Still a limited market with some underwriters reevaluating their book and others showing increased interest in small, regional health plans. Carriers continue to limit capacity and apply higher retentions, lower sublimits and coinsurance.
Despite the ongoing challenges, medical professionals and healthcare organizations facing rate increases can take measures to minimize the impact. Maintaining vigilance and staying up to date on developing legislation can help to anticipate and address changes:
- Partner with a healthcare specialty broker who has access to the largest array of carriers, knowledge of where risks should be placed, and the ability to assist with the quoting process to ensure placement with the appropriate carrier.
- Start the renewal process early and ensure clear communication and transparency. Any changes in operations, including named insureds, should be discussed with underwriters. Clients should also provide details on past financial performance and anticipated changes for the upcoming policy term.
- Secure coverage with an AM Best A-Rated carrier. Longevity and financial stability are very important, and these carriers typically have the highest level of service and reliability, making them better to work with while handling claims and navigating other challenges. They also offer added benefits and resources to help mitigate the risk of claims, keeping premiums low.
- Explore a captive or expand the use of an existing captive. The insurance market has hardened in recent years, and captives are often used for risks where traditional carriers are unwilling to cover or for coverage that is cost prohibitive in the commercial marketplace.
- Evaluate additional risks including billing errors and omissions, active shooter threats, wage and hour, and sexual abuse.