Malpractice premiums are rising: Here’s why, and what you can do
Key Takeaways
In 2021, 29.5% of medical malpractice insurance premiums increased.
An AMA analysis indicates that this may be the beginning of a trend in premium hikes akin to what physicians experienced in the early 2000s. While it appears that COVID-19 didn’t have an immediate effect on premiums, it’s too soon to ascertain its long-term implications.
Physicians looking to lower premiums should check with their carriers to see if they offer discounts or rebates for completing courses or reviewing educational materials.
Everything has gotten more expensive—even medical malpractice insurance premiums. That’s according to a March 2022 report from the AMA.[]
In 2021, 29.5% of premiums increased year-over-year. That increase came on the heels of two others.
In 2020, 31.1% of premiums increased—the highest increase since 2005—and in 2019, 26.5% increased.
For context, 13.7% of malpractice insurance premiums increased in 2018, nearly doubling the year after. Also, premium increases were comparatively level from 2012 to 2018. Premium increases ranged between 12.2% and 17.2% during that time frame.
A growing trend
In 2021, small premium increases were dispersed throughout the US, in about a third of states in both 2020 and 2021. But five states had the highest percentage of premiums that increased:
Illinois: 80.6%
West Virginia: 75.0%
Missouri: 44.4%
Oregon: 60.0%
South Carolina: 50.0%
As any OB/Gyn will tell you, specialty can have just as great an effect on your premiums as location.
Some of the highest premiums for $1M and $3M policies in 2021 were:
OB/GYNs: $215,649
General surgeons: $215,649
IMs: $53,912
A ‘hard market’
Analysts are calling this trend a “hard market”—a liability crisis that occurs when a market upswing increases premiums while reducing the capacity for most types of insurance. These increases have happened before, and they’ve also been more dramatic.
In 2003 and 2004, 77.4% and 82.1% of doctors saw their premiums increase, respectively. If you were a general surgeon in Miami-Dade County, Florida, at the time, you may have seen your premium increase from $110,068 in 2000 to $277,241 by 2004.
Premiums have fallen from these heights in the past. Followed by the hard market of 2003, the situation improved. In 2012 and 2013, 25.7% and 28.7% of doctors saw their premiums go down, respectively. Then, percentages of decreases dropped to single digits in 2016 and stayed there from 2018 until the present.
"The major trend after the last hard market had generally been one of increasing stability, though stability has been on a downswing since 2019."
— AMA
Unfortunately, several signs indicate we’re in the midst of another hard market, according to the AMA:
Deteriorating underwriting results. This is a measure of profit for insurance companies. Insurers calculate underwriting results by subtracting the cost of claims and overhead from the revenue generated by collecting premiums. If it becomes more expensive for insurers to settle malpractice claims, or the number of claims increases, insurers may be tempted to offset losses by raising premiums.
Lower loss reserve margins. Loss reserves are estimates that insurers make on the amount they will need to pay on future claims over and above what’s expected. Set the loss reserve too low, and actual claims are greater than anticipated, while insurer profits take a hit, prompting some to raise premiums.
Lower returns on investment. Simply, insurers aren’t making as much profit off policies as they used to.
Many doctors are wondering if these increases stem from the COVID-19 pandemic. According to the AMA, while it appears the pandemic hasn’t affected premiums, it’s still too soon to know whether there will be long-term effects.
Some insurers extended premium discounts, rebates, and special dividends to doctors if they practiced less as a result of the pandemic, but many doctors also took up telemedicine.
Hopefully, medical malpractice premiums don’t follow gasoline’s trend line. Regardless, there are a few things you can do to keep your premiums in check.
The first is to check with your medical malpractice carrier to see if they offer courses or tutorials on risk management. Remember: You and your insurer are equally financially incentivized to remain claim-free. As a result, many offer free classes and materials on risk reduction, and subsequent discounts for completing both.
Next, check to see if insurance discounts are offered to members of any of the professional organizations you belong to.
And finally (and perhaps obviously), strive to stay claim-free. But remember, no one is perfect.
More than a third of doctors will defend a liability lawsuit at some point in their careers, according to the AMA.
Doctors can stay abreast of malpractice insurance trends at the AMA’s Sustainability page.
What this means for you
Malpractice insurances rates are rising. But recent history suggests insurance premiums are also cyclical; rate hikes in the early 2000s were followed by steady declines . While rates appear to be on the upswing, it’s unknown if the pandemic will have any long-term effects. See if your carrier offers discounts for continued education, or if you can get them through professional organizations.