An already tricky sector of the healthcare P/C sector is facing new difficulties.
According to a report from specialist healthcare insurer
Hiscox, so-called “super losses”—those totaling more than $5 million—are accounting for a growing proportion of total dollars spent in claims. Based on the company’s own data, the percentage of total dollars spent in claims for losses of $5 million annually was in the 7.5% to 10% range in the early 2000s. Now, that figure has moved up into the 15% to 25% range and is expected to increase.
“We suspected that the prevalence of high verdict amounts was growing, so we thought we’d have a closer look,” said Justin Keith, vice president of underwriting with Hiscox. “Sure enough, there’s a definite creep in severity in the $5 million to $10 million band.”
Keith noted that the growth in frequency of these super-losses is equitable across nearly all types of healthcare facilities and practices, regardless of the size of the facility or perceived quality of care. He attributes the change primarily to the growing litigiousness of Americans and the increasing “business-like” nature of smaller hospitals.
“There’s a sentiment in the US of general distrust with big business, so when your community hospital that you’ve known for 30 years becomes part of a much bigger national hospital corporation, you’re no longer suing your friend,” Keith said. “You’re suing some faceless name.”
Hiscox adds that healthcare reform in the US is having “both a positive and negative impact” on medical malpractice costs, with better risk management but also a significant amount of disruption generated by the increased number of mergers and acquisitions in the space.
The new pressures have seen some carriers exit the market, particularly in spaces like long-term care, though new offerings in big-ticket items like hospitals continue to grow.
For insurance brokers and carriers in the space, Keith offers one general observation and word of warning:
“Things are good now, but let’s take a deep breath and realize it may not be as good tomorrow as it is today,” he said.
