MedMal Insurance Rates Continue to Shrink, Market Likely Years from Hardening

Medical Liability Monitor’s 2012 Rate Survey Indicates Medical Professional Liability Insurance Premiums Continue to Shrink, Market Likely Years from Hardening

Since 1991, Medical Liability Monitor—an independent, industry newsletter—has been surveying the leading providers of medical professional liability insurance (MPLI) for its annual rate report. This year’s survey reports rates from more than 40 companies that represent as much as 75 percent of the physician’s malpractice insurance market. It is the most comprehensive report on MPLI premium rates available.

Chicago—According to data from the 2012 Medical Liability Monitor Annual Rate Survey, base-rate premiums for medical professional liability insurance (MPLI) have been declining since 2006, but year after year the industry as a whole continues to post impressive, strong financial performances.

“Medical professional liability insurance premiums have been falling for years now,” said Michael Matray, editor of the Medical Liability Monitor. “Eventually those shrinking premiums are going to become unsustainable, but no one is certain as to when that point will be reached. It may be a few years down the road.”

As has been the case for the last six years, the MPLI industry is in a soft market, characterized by flat or shrinking premiums and a loosening of underwriting standards. In this year’s Annual Rate Survey the majority of rates remained flat (59.2 percent of all rates did not change). Where rates did move downward, 61 percent decreased between 0.1 percent and 9.9 percent. A little more than 30 percent of downward rate changes fell between 10 and 19.9 percent, and 8 percent of all downward rate changes occurred in the 20 to 29.9 percent range. A miniscule 0.4 percent of the rate reductions landed in the greater than 30 percent range.

By comparison, only 15.1 percent of all rate changes were increases, essentially flat when compared with the 14.5 percent registered for 2011 and the 14.2 percent of all adjusted rates that rose in 2010. As has been typical for the past six years, the great majority of increases in 2012 were in the 0.1 to 9.9 percent increase range (13.5 percent), an increase over the 9.4 percent of all increases that lived in that range last year. Only 0.2 percent of rates increased in the 10 to 24.9 percent range, and 1.4 percent increased in the 25 to 49.9 percent range.

MPLI companies continued to increase the use of schedule credits during the last year. The percentage of companies increasing their use of credits went up from 29 percent in 2011 to 37 percent in 2012. Credits serve to reduce the actual charged rates beyond those collected in this survey. So the overall reduction in manual rates could actually be two to three times larger than this year’s survey represents.

The question at the heart of this year’s Annual Rate Survey was, “When will the MPLI market begin to harden?” And the answer likely isn’t satisfying.

“The market has been soft for the past five or six years, and is likely to continue to be for a few more,” said Chad Karls, principal and consulting actuary at Milliman Inc., and guest editor of the Annual Rate Survey. “Exactly how many years it will take before the financials will become unacceptable is difficult to predict. What we can say with some degree of confidence is that when we do reach that point, it will likely be another few years before the market begins to truly harden again.”

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Medical Liability Monitor is the only independent publication reporting exclusively on medical professional liability insurance. The monthly newsletter, founded in 1975, has conducted the Annual Rate Survey since 1991. To order the rate survey or to subscribe, visit www.mlmonitor.com or call 312-944-7900.