MPLI Sector Outperforms Property/Casualty in 2011
The top five writers in the sector included Doctors Insurance Group, MLMIC Group, Berkshire Hathaway Insurance Group and ProAssurance Group, according to a new A.M. Best report.
Insurance Networking News, May 3, 2012
The medical professional liability insurance (MPLI) sector outperformed its property/ casualty peers with profits and steady increases in surplus, according to an A.M. Best study.
“It’s easy to become overconfident when things have been good as they have been. We must take a clear view over 35 years of the business not just the past five years,” A.M. Best Assistant Vice President Henry Witmer said yesterday during a Web discussion on the state of the U.S. MPLI sector. “The business is cyclical and companies need to be prepared for the changes that will occur.”
There are 32 states that have enacted limits on medical professional liability cases and of those challenged, more than two-thirds have been upheld, in state supreme courts, according to the report. But over the past two years, there were seven cases in six states that awarded more than $1 billion in damages in total.
“As long as claims frequency remains flat in the short run, we’re fine,” said Howard Friedman, chief underwriting officer with ProAssurance Corp. “If we start to see a pick up on a wide spread basis, it will signal issues coming down the road.”
Going forward, electronic medical records and the Health Insurance Portability and Accountability Act present a host of potential cyber liabilities, according to the study.
“A new development in the last 10 years is the world of electronic medical records,” said Physician Insurers Association of America CEO and President Brian Atchinson. “These are problematic because there are no consistent approaches or systems. It requires that medical professionals master multiple medical technologies.”
Despite the depressed interest rate environment, the MPLI sector continues to stand out among insurance sectors. “A decline in investment yield has resulted in rate increases in some areas or less than what would be expected if we were in a constant rate environment,” said Witmer, co-author of the study. “Lower investment yields are dampening rate reductions.”
The study reported that the trend of mergers and acquisitions among MPL insurers continued in 2011 with Medical Protective acquiring Princeton Insurance from Medical Liability Mutual Insurance Co and Doctors Company Insurance Group acquiring FPIC Insurance Group while the NORCAL Group purchased Medicus Insurance Holdings Inc.
“It’s a good time for new entrants. The companies that have performed the best made a long term commitment to this line,” said Physician Insurers Association of America’s Atchinson.
A.M. Best’s report states that there will be ongoing consolidations of MPL insurers as companies seek to diversify their businesses geographically, by line of business or by MPLI specialty.
“Continued consolidation is likely given the shrinking market with respect to smaller companies, which will likely continue to see a declining premium base,” said ProAssurance Corp.’s Friedman.
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