What’s happening with physician malpractice insurance rates?

Malpractice insurance rates for physicians can vary widely based on a number of influences, including specialty, location and claims history. Therefore, it’s challenging to provide a definitive answer regarding whether rates are rising, falling or staying the same universally, as the landscape can vary depending on these factors.

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Robert G. Koch, a veteran independent insurance agent specializing in medical liability insurance at Argus Risk Advisors, has seen rates rise in the territories he works in (mostly Michigan and New York), explaining that carriers have had to pull back on credits and base rates have been on the rise.

“The carriers are hopeful that that market is stabilizing and rates going forward should level out, but with fallout from COVID-19 and some other industry and economics factors, it’s still up in the air,” he says.

Additionally, there have been much larger payouts over the past five to eight years, causing rates to rise. In some cases, claims frequency has gone up as well, but overall claims have been on a decline.

“The rate increase has contributed to the rise in claim payouts,” Koch says. “Over the past 20 years, that market has had periods known as soft markets and hard markets, which is basically the fluctuation in premium cost. Since about 2019, we have been moving slowly toward a hard market with the hope of stabilizing. This has been due to an increase in the severity of claims.”

Otto Larson, partner and insurance agent with Wallace & Turner Insurance in Springfield, Ohio, has seen medical malpractice rates rise on average between 5% and 15% in 2023 because of changes in tort reform and inflation.

“The rollback of tort reform in several larger states and increasing claims severity are causing rates to increase in 2023,” he says.

Still, this isn’t the experience for all physicians and all states.

Since the pandemic, malpractice insurance rates for many have remained generally stable and even decreased in some areas, according to experts.

“One reason for stable or decreasing rates is that there has been a decline in malpractice claims and payouts in recent years,” says Danielle Kelvas, MD, a family physician in Tennessee. “This trend is likely due to a variety of factors, including increased use of electronic health records, improved patient safety measures and changes in state laws that make it more difficult to file malpractice lawsuits.”

Matthew Dobish, health care national practice leader at Marsh McLennan Agency, notes that malpractice insurance rates can take many shapes and sizes and numerous factors come into play when determining premiums, such as specialty, prior history and jurisdiction.

The overarching theme to malpractice rates in 2023, he says, is “flat.”

“It seems to be a balancing act between frequency and severity,” Dobish says. “While the overall number of claims has decreased from a perspective of care, nuclear verdicts are on the rise as the courts reopen from pandemic times. Nuclear verdicts, which describes oversized awards, are often influenced by social inflation. The uncertainty that social inflation plays in the underwriting process will always leave a sense of unease in the back of an underwriter’s mind, regardless of how clean the provider’s record of care is.”

When it’s time to change

Many physicians stay with their malpractice insurance carrier for their entire career, but that’s not always a sound strategy.

In Koch’s opinion, certain physician specialties should be looking at their malpractice insurance every year or two, and most should shop around at least every three years.

“Rates can change every year and in some parts of my territories, they do fluctuate almost every year,” he says. “It only makes sense to see what’s out there.”

However, there are many factors that physicians need to consider before moving their policy. Tails, claims and retirement should all factor into the decision.

“Physicians should work with a reputable insurance broker who has all the markets in their territories,” Koch says. “Brokers have knowledge of the market and should be in conversation with these carriers all the time to know what changes might be coming and be able to move quickly to provide the proper coverage and the best financial outcome for the physicians.”

Larson recommends that physicians look at market options every five years or so on average and not stay with an insurer out of loyalty.

“Finding a broker and carrier who are in the industry will help physicians save time and find the best rates possible based on their particular needs,” he says.

When doctors change their malpractice insurance carrier, sometimes it’s not a seamless transition. It’s important to understand how future claims will be handled by carriers writing coverage on either an occurrence or claims made basis.

“Generally, switching is not a difficult process, but like everyone else, physicians get used to doing things a certain way and some carriers have different processes,” Koch says. “This can cause some difficulties when a physician changes carrier. As long as the broker is on top of things, switching carriers should only cause a small inconvenience in time for their insureds.”

There are many ways to shop for insurance, and with all of the changes in the delivery of care and the regulatory environment, experts say it is more imperative than ever that physicians focus on the relationship with the patients and employees, and leave the shopping of insurance up to a qualified insurance broker.

“Unfortunately, working with a broker who solely focuses on medical malpractice is no longer comprehensive enough,” Dobish says. “Risks continue to develop and emerge. The way in which insurance policies respond to claims now needs to be coordinated.”

For instance, he has seen singular claims seek the limit from multiple policies, so working with a broker who understands the health care industry is imperative to managing the physician’s risk properly.

“Many times, a physician will want to simply shop a price, but shopping for the right broker to represent you to the marketplace is where you will see the biggest return,” Dobish says. “Once the broker relationship is determined, allow them to provide their diligence and review of the marketplace. Gathering multiple proposals from multiple brokers is a sure way to have an underwriter look the other way when the risk comes across their desk. Also, comparing one format to another is an almost certain recipe for important coverages to fall through the cracks.”

Dobish adds that physicians need to stay on top of all their insurance portfolios and not just their medical malpractice.

“What was required of a practice 20 years ago versus today is exponential in exposure,” he says. “With more oversight from regulatory bodies, the need for miscellaneous professional liability has almost become a requirement depending on the size of your practice. With the digitization of our medical files, reliance on emerging technologies and the new deliveries of medicine such as telehealth, cyber liability has become an increasing line item. And as medical groups have grown through mergers and acquisitions, asset portfolios have grown increasing their risk and the amount that needs to be budgeted.”

Finding better rates

Physicians who are looking for better rates on malpractice insurance can shop around and compare policies from different insurance providers.

“It is important to consider not only the cost of the policy, but also the coverage and limits offered,” Kelvas says. “Physicians may also want to consider working with a broker who can help them navigate the options and find the best policy for their needs.”

Some medical societies and professional organizations offer group malpractice insurance policies that may be more affordable for their members.

Physicians should also try to negotiate rates with their current provider in lieu of leaving.

“Success will depend on how good of a group or physician you insured,” Koch says. “If they have no claims and have been a solid insured, most carriers will do something to try and keep the business.”

Many carriers will offer discounts for risk management and electronic health records best practices and staying ahead of this each year will help physicians control costs and qualify for any available discounts.

One of the main problems with insurance is that it’s fine until it’s not. Managing the risk takes communication and collaboration from all parties.

“Not giving insurance the time until something becomes a crisis is a recipe for disaster, and things quickly do become a crisis,” Dobish says. “So it’s important when evaluating brokers that there is a clear timeline, with responsibilities of both parties that the proper resources and attention be paid. Fast is expensive. Do not wait to have a deeper understanding of your insurance portfolio.”

Experts emphasize that while malpractice insurance can provide important protection for physicians, it is not a substitute for good clinical practice and risk management. Physicians should always strive to provide high-quality care and take steps to minimize the risk of malpractice claims.