Health Care Liability Market Faces Uncertainty as Loss Severity Increases
Medical professional liability insurance, a critical subset of the professional liability market, safeguards health care providers from medical errors or malpractice claims, which is crucial for an industry with high stakes and intricate procedures, according to OneShield. However, as the health care sector continues to evolve with new technologies and advancements in medicine, it also faces staffing difficulties and a shifting litigation landscape. As a result, the medical professional liability insurance market is facing substantial difficulties.
A recent analysis of insurance premiums in general surgery, obstetrics and gynecology, and internal medicine by the American Medical Association (AMA) shows that 49.8% of medical liability insurance premiums increased in 2024 over the previous year, which was the most since 2005. Medical liability premiums experienced an upward trajectory for the sixth year in a row in 2024, the report says, where the average premium increase was 2.5% from 2023 to 2024, up from 1.9% from 2020 to 2021.
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The leading drivers of increasing premiums relate to the severity of claims for “hospitals, nursing homes and long-term care facilities,” says Greg Ferrell, national vice president, head of medical lines, Admiral Insurance Group, a Berkley Company. “With increased claims expenses and social inflation, carriers are simply trying to level out their results.”
Clients are experiencing increasing professional liability premiums in certain medical fields. “The higher the risk of the treatment or surgery—for example, spinal surgery and brain surgery—will result in higher claims and settlements for malpractice claims, thus significantly impacting combined ratios,” says R.P. Hallenbeck, senior vice president, health care practice leader, Amwins. “Since 2014, the U.S. health care liability market has been driven by an underwriting loss environment with carrier combined operating ratios in the 100% to 120% range.”
“Legislative and judicial actions are weakening tort reforms and creating more plaintiff-friendly laws in many states,” Hallenbeck says. “In addition, jury demographics and attitudes are amplifying the complexity of defending health care providers and taking cases to trial.”
Increasing litigiousness and its effect on costs highlights risks within the health care profession that are greater than ever before.
“The risk tolerance has certainly expanded the appetites of medical providers across the industry, but when we look at the carriers that we deal with, some have simply exited certain classes of business and others have adjusted their rates to accommodate the increase in the various exposures,” says Rahmad Bauldrick, associate vice president, regional practice group leader, professional, Burns & Wilcox. “Further, as claims continue to outpace the premiums charged, the result has led to an influx of harder-to-place risks moving into the excess & surplus market.”
While the impact on capacity on a primary basis is not an issue with most markets writing up to $5 million, “unfortunately, what we have been seeing the past number of years with many markets is a downshift to only offering a max of $3 million,” Bauldrick says. “This leaves a greater opportunity for other markets to write excess on these accounts.”
Further, “in many cases, carriers on top of heavy excess layers have either reduced their limit offering or carriers that have historically written both the primary and the umbrella layers are eliminating the umbrella layers and offering only primary renewal terms,” Ferrell says. “With the increase in ‘nuclear’ verdicts across the medical professional liability space, carriers are simply trying to limit their potential exposure to a possible large claim.”
Rising costs within the sector threaten coverage affordability and, in the long run, availability. Yet, insureds still need coverage. “Demand is constant and with fewer carriers in the space, coupled with reduced limits and capacity, premiums have increased,” Ferrell says. “We’ve also seen historically ‘cleaner venues’ become not only more litigious in terms of the number of claims, but also in severity, which drives premiums as well.”
Despite this, the outlook for the medical professional liability market has been rated as stable as of March 2025 by AM Best due to robust balance sheets and higher reinvestment rates.
Olivia Overman is IA content editor.
