After a 12-year run of ever-decreasing premiums and soft underwriting, the health care industry must now brace itself for a coming storm – a hard market. A hard market is most often caused by insurance companies (insurers) paying significant claims while not collecting enough premium to offset them. They must then pass those losses on to their customers (insureds) in the form of higher premiums. Additionally, hard markets see insurers imposing strict underwriting standards, asking more questions, issuing fewer policies, non-renewing physicians with claims and not being as willing to negotiate with the physicians who remain. The hard market is coming for the first time since 2005. 

Physicians and practices with significant claims in their recent (10-year) history may find themselves unable to purchase coverage in the standard market, turning to the excess and surplus markets for assistance. Meanwhile, for practitioners who seek alternative streams of income to help offset rising expenses (like opening Med Spas in their offices or offering procedures that are cutting edge or trendy), tightening underwriting guidelines often prevent coverage for these ventures on the standard policy, requiring these insureds to purchase separate policies from the excess and surplus market or to abandon these ventures altogether. 

The effects of a hard market can also affect patients. Due to unaffordable malpractice premiums, some specialist practices could be forced to close, leaving patients without the care they need – especially in areas where doctors are already scarce. During the last hard market, for instance, many women were forced to cross state lines to deliver their babies because the OB/GYN practices that had been in their area were forced to close.

The hard market can also affect insurers. In the past, we’ve seen insurers go bankrupt or dissolve after being crippled by claims that outstrip premium reserves, leaving their clients “holding the bag” with no carrier, no coverage and no defense attorneys to defend their doctors in the event of a claim – even after paying their malpractice insurance premiums for many years. 

So, what can you do to prepare?

The best thing to do to be ready for this storm is to budget for it, plan ahead and work with a true expert in the medical malpractice insurance field. It has been roughly 15 years since we last saw these market conditions; for many agents and brokers, this will be their first experience with a hard market, which can result in the blind leading the blind.

Partnering with an insurance advisor who has weathered the hard market storm in the past and knows how to navigate these troubled waters is an invaluable asset to practices faced with this daunting new climate. They can help you find competitive pricing across many different providers and help you find the right price point for the level of coverage you need, including strategies that share risk to reduce premium cost. 

Partnering with a medical malpractice insurance specialist who has been through the hard market before is not just something you should do; it’s something you need to do to protect your practice, your patients and your livelihood. With an experienced insurance advisor at the helm, the hard market storm is much easier to navigate and survive.