Malpractice Insurance Premiums Increased 22%, Despite Fewer Claims

The number of malpractice claims filed against hospitals and physicians dropped 14% in 2020, even as premiums rose 22% on average, according to the most recent report by the American Society for Health Care Risk Management and Aon published in late 2021.

An analysis of Aon’s database found that 4,718 medical professional liability claims were filed within six months of occurrence in 2020, 14% lower than the average of 5,514 reported claims from 2015 to 2019. That translates to a claim frequency of 0.54% per occupied bed equivalent, compared to annual frequency rates that ranged from 0.63% to 0.71% from 2014 to 2019.

Also, the number of claims that closed within six months plummeted to 826 in 2020, compared to numbers that ranged from 1,587 to 2,072 in each of the preceding five years.

The researchers speculated that COVID-19 strategizing may have been a factor.

The report says average premium rates increased by 22% at renewal last year, based on a survey of 67 healthcare systems. Insureds paid an average of $50,000 for every $1 million in insurance limits, up from $42,000 under the preceding insurance program.

Aon said that overall capacity for the professional medical liability line was relatively unencumbered for the first half of 2020, but several carriers have stopped underwriting malpractice risks, leading to hard market conditions.

The survey results show that insured retentions increased in 2020, to an average of $7.8 million from $6.9 million in 2019. Also, purchased insurance limits decreased to $83.5 million in 2020 from $85.9 million the year before.

Medical professional liability exposures are expected to continue to increase. The report predicted no change in claim frequency, but established a 3% severity trend in 2022 for both general liability and physician professional liability.