This document summarizes the 26th Annual Rate Survey published by Medical Liability Monitor. It provides a state-by-state overview of changing medical malpractice insurance rates as of July 1, 2016. The survey reports rates for three specialties - internal medicine, general surgery, and obstetrics/gynecology - from the major medical malpractice insurers in each state. While medical malpractice insurance rates have remained stable in recent years, factors like increasing severity of claims payments and consolidation among hospitals and physicians could impact rates and profitability for insurers in the future.

1. In this issue, we bring you our 26th
Annual Rate Survey. This issue provides a
continuing overview of changing rates
for physicians’medical professional liabil-
ity insurance. It is a snapshot in time,
reporting rates effective July 1, 2016.
It is a picture we paint state by state,
county by county because where physi-
cians practice largely determines the pre-
miums they pay. This is because insurers
base their rates on the aggregate claims
experience in a particular geographic
area. Because state insurance depart-
ments may regulate rates, state tort
reforms can affect the cost and patient
compensation funds may influence the
total premium, it is impossible to project
a common national picture.
Each year, we survey the major writers
of liability insurance for physicians. We
ask for manual rates for specific mature,
claims-made specialties with limits of $1
million/$3 million—by far the most com-
mon limits. These are the rates reported
unless otherwise noted.
We report on three specialties to
reflect the wide range of rates charged:
Internal Medicine, General Surgery and
Obstetrics/Gynecology.
With the exception of Medical
Protective, Princeton, PLICO and
Physicians’ Reciprocal Insurers, all rates
shown were volunteered by their respec-
tive companies. Those companies’ rates
published herein were obtained through
ANNUAL RATE SURVEY ISSUE
RATE REPORT PRESENTS
STATE-BY-STATE VIEW
OF CHANGING MARKET
OCTOBER 2016 VOL 41, NO 10
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→CONTINUED ON PAGE 2
DO STILL WATERS STILL RUN DEEP?
MEDICAL PROFESSIONAL LIABILITY IN 2016
by Paul Greve, JD, RPLU,
and Alison Milford, ACAS, MAAA
The medical professional liability insur-
ance industry is continuing its unprece-
dented run of consecutive profitable years
in 2016. Never before has the industry wit-
nessed such an unbroken string of annual
favorable results, many of which were very
favorable.
If we apply the metaphor of sailing a
ship to the medical professional liability
industry, strong tailwinds and minimal
waves have made for very smooth sailing
during the past decade. But to be prudent,
it’s smart to annually reexamine whether
the weather is still favorable for safely sail-
ing to profitability in MPL underwriting. Are
there any storms on the horizon?
THE NATIONAL ENVIRONMENT: SAFE HARBORS
During the last decade or so, we’ve heard
more than a few industry observers prog-
nosticate that the party will soon be over:
the hard market is coming. They’ve been
dead wrong.
The prognosticators’ thoughts were not
without basis given the past hard-and-soft
cycles the medical professional liability
insurance industry experienced in the 1970s,
1980s and 1990s—with carryover into the
first years of the 21st century. But there were,
and are, many well-recognized factors that
went in the medical liability industry’s favor
during the first five years or so of the last
decade. It would be a mistake to overlook
them or minimize their continuing favorable
effects. These factors include:
• Successful medical liability tort reform
laws enacted in many states.
• Most of the medical liability tort reform
laws enacted have been upheld by state
courts—with a few notable exceptions.
• Physician advocates—like the PIAA,
American Medical Association, state med-
ical societies and other tort reform champi-
ons—have helped shift the American pub-
lic’s perspective regarding medical malprac-
tice litigation in the healthcare sector’s
favor. Much of the advocacy of this type
pointed to the link between healthcare
access and medical professional liability
costs. Today’s juries are much more likely to
be sympathetic to the defendant physician
than in years past. This attitude shift has
resulted in a drop in claims frequency and
fewer multi-million dollar jury verdicts.
• The cost of funding malpractice litiga-
tion became a barrier for the trial bar, which
has also contributed to the decline in med-
ical malpractice claims frequency.
• Patient safety initiatives have improved
care. A great example is obstetrics. Although
fraught with potentially catastrophic risk,
patient safety initiatives have effectively
improved obstetric risk in both claim fre-
quency and severity.
• Claim frequency has remained at his-
toric lows and demonstrates little-to-no
evidence of a significant upward trend in
the near future.
Let’s examine each of these six points
closer because they have been the anchors
keeping the medical professional liability
insurance industry in safe harbors and out
of stormy waters.
The first four points involve successful
tort reform laws and a shift in the American
public’s view toward medical malpractice lit-
igation. This shows no signs of changing in
the near term, nor does the significant cost
to the trial bar when it comes to funding

2. 2
medical liability litigation.
One can argue about the efficacy of
patient safety initiatives, but the rapid
pace of technological advancement in
healthcare should ultimately help reduce
patient injuries over time. Claim frequency
has always been unpredictable, but if it
were to turn upward, it’s likely that the rise
in litigation would be more gradual than
what the industry has witnessed historical-
ly. There do not seem to be any factors on
the horizon that would precipitate a large
wave of medical liability claims.
One point that should be carefully
watched is the American public’s perspec-
tive toward medical malpractice lawsuits.
Consolidation in the healthcare industry,
characterized by the purchase of commu-
nity hospitals by large systems and the
employment of physicians, could result in
a change in the overall perception of hos-
pitals and physicians. These larger systems
face the risk of being viewed as profit-driv-
en to the exclusion of all else.
All types of healthcare providers are
pursuing aggressive collection policies as
health insurance programs push off more
and more cost on to insureds in the form
of deductibles and co-payments. Will this
erode the public’s good will to hospitals
and physicians?
These six factors, as well as others,
bode well for the future. One thing that
must be kept in mind is that past medical
professional liability industry cycles with
very poor results were driven by claim
activity, especially claim frequency. Today
there are far fewer claims, but verdict and
settlement valuations are higher in those
claims that are paid. Still, it’s difficult, but
not impossible, to imagine a scenario
where claim frequency remains relatively
low, yet claim severity alone dramatically
drives up medical professional liability
insurance premiums unless we see a
notable increase in the frequency of sever-
ity. Increasing severity would cause rates
and premiums to rise, but it’s unlikely we
would witness the size of premium
increases that characterized hard markets
some 15 to 20 years ago.
HOSPITAL CONSOLIDATION
Consolidation of the hospital industry via
mergers and acquisitions has continued
unabated into 2016, leading to the cre-
ation of many large healthcare systems
comprised of multiple facilities.
Generally speaking, the larger the
organization, the greater their self-insured
retention. Many hospital systems retain
the first $3 million to upward of $20-mil-
lion-or-more of individual medical liability
claims. These large healthcare systems
often own a captive insurance company,
and if it has been in existence for more
than a few years, it has likely benefited sig-
nificantly from favorable claim trends and
thus is well capitalized.
If excess hospital insurers/reinsurers
were to attempt to pass along significant
Subscriptions: Annual subscription rate $399, which includes monthly issues and
the Annual Rate Survey. Subscriptions are available at www.mlmonitor.com or by
calling 312-944-7900.
© 2016 Medical Liability Monitor, Inc. Published monthly. May not be reproduced
in whole or part without permission.
JAMES H. CUNNINGHAM
Publisher
MICHAEL MATRAY
Editor
HERB JONES
Circulation Manager
P.O. Box 680
Oak Park, IL 60303
312-944-7900
Fax: 312-944-8845
e-mail: editor@mlmonitor.com
website: www.mlmonitor.com
Twitter: @MedMalMonitor
MEDICAL LIABILITY MONITOR OCTOBER 2016 VOL 41, NO 10
→CONTINUED FROM COVER
independent research and are believed
to be accurate.
The rates reported should not be
interpreted as the actual premiums an
individual physician pays for coverage.
They do not reflect credits, debits, divi-
dends or other factors that may reduce or
increase premiums. Rates reported also
do not include other underwriting factors
that can increase premiums.
States without compensation funds,
by far the largest group, are reported first.
Patient compensation fund states are
grouped at the end of the survey.
In patient compensation fund states,
physicians pay surcharges that range
from a modest percentage to more than
the base premium. Also, limits of cover-
age can differ in these states, which is
noted with each PCF state.
When we contact survey participants,
we ask them to provide data on all the
states in which they actively market to
physicians. We only report rates for com-
panies that maintain filed and approved
rates for each state in which they sell
medical professional liability insurance.
We try to capture the leading, active writ-
ers in each state, but every writer may not
be included.
In comparing this year’s report with
previous reports, it is evident that the
market is always changing. Many compa-
nies formerly included no longer sell
physicians’ malpractice insurance in cer-
tain states, do not currently entertain new
business, have withdrawn from this line
of insurance or no longer exist. The com-
panies shown were available for business
as of July 1, 2016.
We estimate that this survey repre-
sents companies that comprise 65 to 75
percent of the market; as such, it is the
most comprehensive report on medical
professional liability rates available.
The expanded rate report could not
have been completed without the coop-
eration of the many people who work in
the companies surveyed. Their coopera-
tion is invaluable in providing this infor-
mation to all who have an interest in
medical professional liability.
→CONTINUED FROM COVER

3. rate increases, however justified, these large highly self-insured health-
care entities would likely react by simply raising their retentions or per-
haps not purchasing any excess medical liability insurance/reinsur-
ance.Thus, the industry has much less leverage to raise premiums than
it has had in the past with these types of large buyers.
PHYSICIAN EMPLOYMENT AND LARGE GROUPS
The employment of physicians by hospitals has been a notable trend
since passage of the Patient Protection & Affordable Care Act of 2010,
but there has been a marked deceleration in that trend recently, with
the exception of primary care. This varies by regional market.
Oneothertrendofnoteistheformationofmulti-specialtyphysician
groups that want to remain
independent of large health-
care systems. Many physicians
don’t want to become hospital
employees, but don’t want to
face the high overhead and
hassle of running a private
practice alone. Large multi-
specialty physician groups
help in addressing those
issues and give them signifi-
cant purchasing power,
including when it comes to
medical professional liability insurance. A number of large groups have
formed risk retention groups and captive insurance companies, which
is taking even more premium dollars out of the commercial market.
SIGNIFICANT OBSERVATIONS FROM ANNUAL RATE SURVEY RESULTS
In contrast to a significantly changing healthcare delivery system and
medical professional liability insurance purchasing population, the
MPL marketplace observed a fairly storm-free year with no real sen-
tinel events or actions that would signal poor sailing conditions or dis-
rupt the apparent slow migration from a competitive, yet profitable,
marketplace to one that turns the corner on one or both fronts.
According to the 2016 MEDICAL LIABILITY MONITOR Annual Rate Survey,
marketplace participants look to effectively compete, but maintain
underwriting and pricing discipline, which can be seen in the overt
actions taken (or, perhaps, more accurately stated, not taken) on filed
rates and the responses provided.
• Respondents are expanding into new jurisdictions, broadening
product offerings in current and new jurisdictions, deepening the
coverage and benefits provided to their historic core insured base as
well as pushing to sell bundled and unbundled non-risk bearing serv-
ices as a means to be relevant and responsive to an evolving insured
base. Many of these are not new or novel activities. However, the
emphasis on and significance of these activities has increased.
• From a competitive standpoint, only 23 percent of respondents
registered concerns about underwriting guidelines used by competi-
tors in the 2016 survey, down significantly from 2015 results of 52 per-
cent and more in line with 2014 results. A lower result would be con-
sistent with a more disciplined marketplace.
• A small portion (15 percent) of respondents have increased their
use of schedule credits in the past year (down from 29 percent in
2015), but several respondents (14 percent) have introduced new
credits (up from zero in 2015).
• Interestingly, just under 80 percent of respondents indicated that
the market is neither becoming harder or softer, but staying about the
same. A little more than 20 percent of respondents believe the market
is getting softer (down from 43 percent in 2015).
• Respondents continue to observe that frequency is generally flat,
with only 8 percent observing a decrease and the same percentage
observing an increase this year.
• Close to one third (31 percent) of respondents stated that rein-
surance costs have decreased in the past one or two years (down from
43 percent in 2015). Similar to last year, only one respondent indicat-
ed that reinsurance costs have increased during the last two years.
Most respondents see reinsurance costs remaining flat.
• All of the respondents expect to continue to see consolidation
within the medical professional liability marketplace. Case in point, the
recent announcement by
Medical Liability Mutual
Insurance Co. (MLMIC) that it
has entered into a definitive
agreement to be acquired by
National Indemnity Co., a sub-
sidiary of Berkshire Hathaway
(See MLM, August 2016).
THE NATIONAL ENVIRONMENT:
POTENTIAL STORMY WATERS
Following are some of the
waves that could make for
rougher sailing for the medical professional liability insurance indus-
try in the years ahead.
Large Verdicts/Settlements. Many insurers report an increase in
large verdicts and settlements, whether within the $1 million to $5
million layer or above that. And there have been an increasing num-
ber of jumbo verdicts in recent years, but those verdicts comprise only
a fraction of 1 percent of all verdicts and settlements. To date, this rise
has been actuarially predictable, unlike it was in the late 1990s.
Because medical liability litigation is so expensive (usually in the
six figures) for the trial bar to fund, they have been forced to be more
selective in pursuing litigation. The medical liability claims that are
being filed often are more volatile and have a high verdict/settle-
ment potential.
The bottom line is that claim severity across the industry must be
carefully monitored. Past crises were driven by claim activity—both
frequency and severity. With claim frequency low, and seemingly sta-
ble, only claim severity could drive a crisis in the near term. Claim
severity has not impacted pricing to date.
Fewer Hospital and Physician Buyers. A continuing source of
downward pressure on medical professional liability insurance rates
has been the steady decline in demand for coverage. This can be
attributed to consolidation in the healthcare industry as well as an
increased use of captives and risk retention groups in recent years.
Consolidation continues unabated in the hospital industry and
shows no signs of slowing. Although the race to purchase physician
practices has slowed markedly for specialty practices, such acquisitions
continue, varying by region. Primary care physicians are highly recruit-
ed for hospital employment and will continue to be. A factor support-
ing the growth of the hospital employment model is that new-to-prac-
tice physicians seem more willing to enter employment with the grow-
ing hospital systems, trading independent practice and associated
issues for a more predictable work environment and income.
The insurance market for both segments is already overcrowded,
and new entrants have appeared in the last three years, while many
3
MEDICAL LIABILITY MONITOR OCTOBER 2016 VOL 41, NO 10
Claim frequency has always been unpredictable,
but if it were to turn upward, it’s likely that the
rise in litigation would be more gradual than
what the industry has witnessed historically.
There do not seem to be any factors on the
horizon that would precipitate a large wave of
medical liability claims.

4. MEDICAL LIABILITY MONITOR OCTOBER 2016 VOL 41, NO 10
4
traditional carriers have sought to expand into these segments.
There is concern that the fierce competition has caused premiums
to drop below what can support profitability. However, while there
are many anecdotal examples supporting the position that business
is being written below profitable levels, aggregated data is less con-
clusive that this is the case on a broader basis and less likely to
prompt actions given current marketplace circumstances.
The potential prelude to stormy waters here is that the anecdotes
are becoming the norm, rather than the exception, and the aggregat-
ed data is lagging in recognition of this change.
Increasing ALAE. In contrast to the moderate-to-low trends
observed on indemnity severities, the defense cost severity, fre-
quently referred to as ALAE (allocated loss adjustment expense, now
“defense and cost containment expense” in statutory reporting ter-
minology), has been increasing at a higher rate. This increasing pres-
sure has not prompted rate action because of all the other favorable
claim trends, which are having a significant effect, but the increased
ALAE costs are not lost on insurers who have focused attention on it.
There are a number of contributing factors. Certainly, general infla-
tionary pressures apply to the rates charged by attorneys, their staff,
expert witnesses and other court-
related services. Additionally,
many insurers have observed law
firms“working cases harder”given
the lower volume of claims and, in
the case of expert witnesses, many
insurers have noted sharp increas-
es in fees charged, well above
inflationary pressures. All of these
put upward pressure on ALAE
severity levels.
Insurers have taken steps to
mitigate increasing costs where
possible. These include develop-
ment of case research data banks
tobesharedamongtheirlawfirmstoavoidduplicativework,moreeco-
nomic procedures for taking depositions and other court-related servic-
es as well as enhanced monitoring tools of legal spend, among others.
For insurers, management of ALAE spend is a balancing act of
maintaining a motivated and knowledgeable defense team as well
as minimizing the increasing ALAE cost pressures. ALAE increases
can contribute to the stormy waters if insurers are not able to
achieve that balance.
Reserve Development. Favorable reserve development during
the last 10 years has played a significant role in the period of prof-
itability observed in the MPL line of business. This run of favorable
aggregated industry reserve development began in 2005 after a
five-year period of unfavorable development. It occurred on the
heels of significant broad-based increases in medical professional
liability insurance rates and high-profile debates about the linkage
among access to healthcare, increases in MPL loss costs/rates and
tort reforms—with many states, consequently, implementing
reforms beginning primarily in the 2003 to 2005 time period (for
example, Florida, Georgia, Illinois and Ohio, among others).
These changes, combined with the difficult-to-measure impacts
of patient safety/risk management, the high cost to bring medical
professional liability claims and a chill of the credit needed to
finance claims due to the financial crisis later on in the decade, led
to lower actual loss costs than expected. Insurers recognized the
effects of these phenomena cautiously over time out of concern for
the uncertainty of how the reforms to tort law would impact liabili-
ty given the time it takes to sort out in the loss experience. The shelf
life of these tort law changes were also a concern as many are/have
been subject to judicial review.
However, as time has passed, the storm clouds are beginning to
assemble as the new lower-cost environment establishes itself as
the norm, even after the effects of the overturn of some reforms
passed earlier in the decade. From the standpoint of reserve devel-
opment, the assembling clouds manifest themselves as a fairly
steadily declining premium volume and its impact on favorable
reserve development.
During the last 10 years, favorable reserve development has ben-
efited otherwise indicated industry calendar-year loss ratios by
more than 27 points in some years. However, that benefit has
declined to nearly 20 points in 2015 based on A.M. Best summarized
results. As discussed below, this begs the question as to whether the
medical professional liability insurance industry will continue the
unprecedented string of calendar-year underwriting profitability
reflected during the last 10 years. Although some would point out
that favorable development is likely to continue (note that A.M.
Best’s May 2016 Special Report on
U.S. MPL suggests a redundancy
of about $2.4 billion at Dec. 31,
2015, down about $0.4 billion rel-
ative to Dec. 31, 2014), is it
enough to offset the current cov-
erage-year loss results discussed
below?
Calendar Year vs. Accident
(Coverage) Year Combined
Ratio. Most individuals interest-
ed in MPL financial results have
marveled at the years of consecu-
tive profitability recorded by the
coverage. But even more unex-
pected has been the fact that these results are contributed to con-
sistently by calendar-year underwriting profitability. That fact might
be unexpected because, during the approximately 40 years MPL has
been reported as a separate line of business, there have been only
13 years reflecting a calendar-year combined ratio under 100 per-
cent. Ten of those 13 have been the last 10 years. This consistent
profitability and level of the calendar-year combined ratio is due, in
no small part, to the favorable reserve development discussed
above. These results can be seen in the graph (see Exhibit 1: MPL
Combined Ratios, on page 5) detailing the “Original Calendar-Year
Combined Ratio” as compiled by A.M. Best. Also observable is the
fairly consistent increase caused, in part, by a declining favorable
reserve development benefit.
However, a second way to evaluate underwriting profitability is
on an accident-year (or coverage-year, considering claims-made and
tail coverage) basis.This is obtained by using the estimate of the cur-
rent accident-year loss ratio rather than the calendar-year loss ratio
(i.e., eliminate the impact of prior-year reserve development). This
perspective provides better insight into current underwriting prof-
itability (i.e., how adequate is current collected premium to cover
current coverage-year losses and operating costs, subject to devel-
opment of the current coverage-year losses). That is the second line
shown on the graph (see Exhibit 1: MPL Combined Ratios, on page 5)
detailing “Original Accident-year Combined Ratio.” Setting aside the
dip of the calendar-year combined ratio in the early years, both lines
In contrast to the moderate-to-low
trends observed on indemnity
severities, the defense cost severity,
frequently referred to as ALAE, has
been increasing at a higher rate. This
increasing pressure has not prompted
rate action because of all the other
favorable claim trends.

5. MEDICAL LIABILITY MONITOR OCTOBER 2016 VOL 41, NO 10
5
show a fairly slow, steady increase
over time, but with the accident-
year-based combined ratio showing
more flattening during the last few
years. However, for the accident-
year-based combined ratio, that
flattening is at a level between 115
percent and 120 percent—not near
underwriting profitability territory.
Some would argue that is not
surprising as the pricing market-
place has, largely, adjusted to new
cost levels, including consideration
of the loss of some of the reforms
implemented. Even further, some
might say the marketplace has
crossed the line to levels that threat-
en overall profitability. Others
would argue that, while the gap
between the two lines reflecting the
reported favorable one-year devel-
opment has narrowed, as noted
above, the gap is not closed if the
A.M. Best estimates are good.
However, in our sailing analogy,
these circumstances suggest deteri-
orating weather ahead and rougher
sailing when it arrives.
SO WHAT DOES THE SURVEY SAY ABOUT RATES?
Last year, the Annual Rate Survey indicated a slight increase in rates
for the first time in eight years. While not materially different than
last year’s average increase, the average rate change in the 2016
Annual Rate Survey is a decrease of 0.1-percent. For the vast majority
(75 percent) of insurers in the survey, rates have remained flat
between 2015 and 2016, slightly higher than the percentage with
no manual change shown in 2015 (71 percent).
Of note is the distortion created by the Patient Compensation
Fund (PCF) states. In most cases, the PCFs are quasi-governmental
entities, operate under different rules than primary carriers, are
often subject to varying degrees of legislative/Insurance
Department oversight and are less susceptible to marketplace deci-
sions and discretion. Typically, the PCF charge is collected by the pri-
mary carrier based on rates established by the PCF, often referred to
as surcharges.
In 2016, and to some degree in 2015, the PCF surcharges have
been impacted by unusual events. For example, the Mcare fund in
Pennsylvania reflected decreased surcharges by about 50 percent in
last year’s survey, but an approximate 40 percent increase in this
year’s survey (related to adjustments called for in a settlement of lit-
igation). Primary carrier rates in Pennsylvania did not change in this
survey (although an additional carrier is reporting).
Besides Pennsylvania, this year’s survey reports changes for the
PCF surcharges in Indiana (increase), Louisiana (decrease) and
Nebraska (increase). Eliminating the distortion created by the PCF
surcharge changes causes the 75-percent no-change percentage
mentioned above to increase to 82 percent, reduces the percent-
ages reflecting increases (15 percent becomes 10 percent) and
slightly reduces the percentage of decreases (9.4 percent becomes
8.6 percent).
Each of the three specialties surveyed saw very slight decreases
in manual rates (0.2 percent, 0.0 percent and 0.1 percent, respective-
ly). The change for General Surgery is very slightly negative, but
rounds to a zero change.
In last year’s 2015 Annual Rate Survey, insurers reported more rate
increases than decreases for the first time since 2006. This trend con-
tinues in the 2016 survey. The differential is slightly wider with 15
percent reporting increases and 9 percent reporting decreases.
Double-digit rate decreases are nonexistent this year. Only three
states are reporting decreases of more than 5 percent: Arizona,
Colorado and Louisiana. Other than Louisiana, the decreases appear
to generally stem from companies that are not the dominant writer
in the state. For Louisiana, the decrease is primarily due to a change
in the PCF surcharge partially offset by an increase in the base rate.
For the twelfth-straight year, most increases were less than 10
percent (14 of the 15 percent increasing). Roughly 1 percent of rate
increases exceeded 10 percent, compared to a more than 5 percent
of rate increases in excess of 10 percent a year ago.
Similarly, 4 percent of last year’s rate increases exceeded 15 per-
cent, whereas this year only one-half-of-1-percent of rate changes
fell in this range.
Regionally, the Northeast and the Midwest are showing overall
average rate increases, albeit very slight increases of 0.8 percent and
0.3 percent, respectively. The increase for the Northeast is driven by
a significant increase in the Pennsylvania PCF surcharge resulting in
Pennsylvania rates increasing roughly 4 percent as well as a modest
increase in Rhode Island. Decreases in Connecticut and Maine par-
tially offset the increases in Pennsylvania and Rhode Island. Other
Northeast states are holding the line.
The increase for the Midwest is also partially driven by increases
to the PCF surcharges in Indiana and Nebraska. There was a modest
increase for Illinois. The increases are almost offset by the slight
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imboCraeYYeradnela
$ $
% % % % % % % % % %
oitaRden
$ $
% % % % % % % % % %
MPL Combined Ratios *
Exhibit 1
* A.M. Best May 9, 2016, Special Report on U.S. Medical Professional Liability
Year

6. decreases for Kansas and Michigan. The remainder of the Midwest
states are flat.
The South and West regions both show average decreases of less
than 1 percent—0.7 percent and 0.5 percent, respectively. In the
South, three states show slight average rate increases, while five
states show decreases. Georgia, Kentucky and South Carolina reflect
increases of 0.3 percent, 2.5 percent and 0.4 percent, respectively.
Florida, Louisiana, North Carolina, Oklahoma and Texas reflect
decreases of 3.7 percent, 6.7 percent, 3.1 percent, 1.3 percent and
0.5 percent, respectively. As noted previously, the decrease in
Louisiana is driven by a decrease in the PCF surcharge partially off-
set by an increase in the base rate. The remaining states in the South
have not changed manual rates.
In the West, there are two states with overall average increases.
California is showing an average manual rate increase of 2.4 percent,
driven by an increase of just under 10 percent for one of the domi-
nant writers in the state. The average increase in Washington is just
under 1 percent, driven by a slight change from one player in that
market.
There are implied average decreasing manual rates in four states
in the West region. Arizona, Colorado, Idaho and Wyoming show
decreases of 8.6 percent, 6.3 percent, 1.8 percent and 2.7 percent,
respectively. In Arizona, the decrease is partially due to the domi-
nant carrier decreasing rates close to 3 percent, but a smaller player
in the Arizona market is significantly decreasing its rates for the
General Surgery and OB/Gyn specialties. Similarly in Colorado, the
dominant carrier is holding rates flat, while some of the other com-
panies writing in the state are decreasing rates. The decrease in
Idaho is driven by a newer player with one of the more established
companies in the market increasing rates slightly. The change in
Wyoming is due to one carrier. The remaining states in the West
region have not changed manual rates since 2015.
HEALTHCARE REFORM: SCANNING THE HORIZON
Due, in part, to the long-tail nature of medical professional liability
claims, healthcare reform has had little to no impact on claims to
date. But changes wrought by the Affordable Care Act will shape
malpractice risk and underwriter response as many healthcare
organizations manage the implementation of healthcare reform,
shift to value-based reimbursement and clinically integrate their
organizations.
Physician and hospital underwriting concerns regarding health-
care reform are focused on:
• A much higher volume of patients receiving primary and emer-
gency care.
• More patient handoffs, as care will need to be better coordinat-
ed along a continuum of providers and facilities, which carry the
potential for allegations of“you dropped the ball”in claim scenarios.
• Allegations that appropriate care was not provided in order to
maximize value-based payment.
• An increased use of telemedicine.
• A greater sophistication in the application of technology for
patient care, including the use of electronic medical records.
• Increased use of joint ventures, partnerships and contractual
networks—accountable care organizations (ACOs), clinically inte-
grated networks (CINs) and clinically integrated organizations
(CIOs)—as less-expensive alternatives or adjuncts to mergers and
acquisitions. This creates the potential for contractual liability and
ostensible agency.
The shift from fee-for-service reimbursement to value-based
reimbursement, which the Affordable Care Act strongly encourages,
is occurring slowly, but will accelerate in the next one to three years.
OTHER MPL MARKET SEGMENTS
We commented briefly for the first time on other medical profes-
sional liability market segments in addition to physicians and sur-
geons/ groups last year. This makes eminent sense as most physi-
cian-focused carriers have expanded their coverages to include such
additional market segments as acute care hospitals/health systems,
long term care facilities, miscellaneous facilities (defined as any
healthcare organization that is not acute or long-term care) and
managed care organizations/health plans. Many medical profes-
sional liability insurers have the policy forms and filings to under-
write these classes of business with the potential to regain some of
the premium lost due to
fewer hospitals and private
practice physicians/groups.
H o s p i t a l s / H e a l t h
Systems. The number of
buyers in this segment has
shrunk significantly due to
consolidation through merg-
ers and acquisitions. The hos-
pital segment continues to
be very competitive, and
recent marketplace entrants
in 2015 and 2016 have fur-
thered that trend. Traditional
physician insurers have also
greatly expanded their facili-
ty underwriting capabilities
in recent years, partly by hir-
ing experienced staff from
traditional hospital insurers,
and have been gaining mar-
ket share—especially for
excess liability coverage. The
MEDICAL LIABILITY MONITOR OCTOBER 2016 VOL 41, NO 10
6
Range 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016*
> +100% 0.0% 0.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
+70.0 to +99% 0.0 0.6 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
+50.0 to +69.9% 0.0 0.4 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
+25.0 to +49.9% 2.3 0.5 0.6 0.0 0.0 0.3 0.1 0.3 0.0 0.2 0.1 0.1
+10.0 to +24.9% 5.6 5.9 1.2 1.9 0.8 4.8 0.2 2.4 0.1 5.5 0.9 0.9
+0.1 to +9.9% 22.6 8.2 5.6 5.7 13.4 9.4 14.8 11.0 12.1 11.4 14.5 8.6
0.0% 46.6 53.1 49.9 54.2 67.0 55.1 59.2 57.6 65.0 71.1 75.2 81.9
-9.9 to -0.1% 15.1 21.0 20.8 22.1 14.9 27.8 15.7 17.2 16.9 9.5 5.0 4.6
-19.9 to -10.0% 5.1 6.5 15.6 12.0 3.6 2.2 7.9 7.8 2.2 1.1 4.2 3.8
-29.9 to -20.0% 1.3 2.3 5.2 3.7 0.3 0.2 2.0 2.6 1.1 0.9 0.1 0.1
< -30.0% 1.4 0.0 1.1 0.2 0.0 0.1 0.1 1.2 2.6 0.3 0.2 0.1
"#$%&'(#)!*+,-%.!/0!%1-23#!*2!456!)'7%1-73#)!
Overall Average Rate Change by Range
Exhibit 2

7. fierce competition in this segment has helped keep pricing low for
hospital buyers. The hospital segment should remain soft—with a
range of flat to low double-digit decreases at typical renewals
depending on loss experience, exposures and territory—through
the end of 2016 and into 2017.
Long Term Care. Long term care is the one segment of medical
professional liability that has firmed slightly in recent years,
although it remains competitive. This is, in part, because of several
new market entrants. Pricing depends on the individual jurisdiction.
In some states and regions, renewals are notably higher than the
typical flat-to-5-percent increases, largely due to recent mega ver-
dicts. A few markets have withdrawn from long term care as a con-
sequence. Accounts with less-than-average loss experience are also
experiencing notable renewal increases.
Miscellaneous Facilities. This
segment of medical professional
liability—comprised of organiza-
tions that provide healthcare, but
are not acute care or long term care
facilities (e.g., ASCs, community
health clinics, urgent care centers,
dialysis, hospice, labs, imaging
facilities, home health, etc.)—is
growing and very competitive.
Competition has been driven in large part by abundant capacity.
Healthcare reform has spurred the growth of such facilities, since
they often provide less-expensive, but still-high-quality, care.
Managed Care Organizations/Health Plans. This segment of
medical professional liability has also remained stable and competi-
tive, growing slightly in recent years primarily due to the Affordable
Care Act. Renewals have seen flat to slight increases and are based
on exposures and revenue. There are far fewer underwriters for both
the primary and excess layers than there are in other segments. The
increase in demand for medical liability as well as errors-and-omis-
sions coverage underwritten by this segment has been driven by the
proliferation of ACOs, CINs and CIOs.
Allied Health Professionals. The allied health professions are
thriving due to the Affordable Care Act. Physician assistants,
advanced nurse practitioners and other types of allied health profes-
sionals are in high demand, especially to deliver primary care given
the shortage of primary care physicians, a situation that is only
expected to worsen in the coming years. Annual premiums are
renewing on a flat basis. This is a competitive line with plenty of
capacity. Rates are quite low and have been for more than a decade.
NEW AND EMERGING RISKS
Following are a few of the emerging medical professional liability
and related risks appearing on the radar.
Cyber/Network Privacy Liability. The American healthcare
industry leads all other industries in data breaches. According to
responses to the 2016 Rate Survey Questionnaire, many underwrit-
ers of physicians and surgeons are now offering coverage for this
risk. Those that do offer it typically provide minimum limits of
$50,000 to $100,000 with the ability to purchase higher limits. Some
carriers offer up to $5 million in limit. A few have experienced claims
(e.g., stolen laptops, etc.).
Batch Claims. Coverage for a series of related events (a “batch”)
is typically offered by hospital excess writers, but also as a form of
reinsurance for physician carriers, often referred to as“systemic cov-
erage.” Carriers anecdotally report a slight increase in these types of
claims. Examples of these types of claims include such scenarios as
the placement of unnecessary stents and the performance of unnec-
essary surgeries. As the individual physician’s limits are so low com-
pared to the potential for a recovery by sometimes hundreds of
patients, the better target defendant is the hospital/hospitals where
the physician practiced. With the high cost to the trial bar of pursu-
ing MPL claims, these scenarios are very attractive for their high
damage potential and potential huge payday for their law firms.
Regulatory Risk Liability. A handful of carriers in the medical
professional liability space now offer a comprehensive regulatory
risk policy as freestanding coverage for claims arising out of fraud
and abuse, HIPAA violations, False Claims Acts, Qui Tam actions and
other regulatory violations. Many physician carriers also offer cover-
age to insureds for various aspects of regulatory/administrative risk
in varying limits, often including
the ability to purchase higher lim-
its of coverage.
Telemedicine. Telemedicine is
exploding as a care delivery
modality. More health insurers are
willing to reimburse physicians
and hospitals for the use of
telemedicine, and more employers
are offering it to employees as part
of their comprehensive benefits package. Telemedicine provides
patient access that—especially in rural and underserved regions—is
cost-effective and convenient. Most carriers responding to the 2016
Rate Survey Questionnaire indicated that they offer telemedicine
coverage. The coverage is being offered across state lines and usual-
ly with little or no underwriting restrictions, except requiring proper
licensure of the insured within the jurisdiction(s). A few have seen
claims, but most are deemed not significant.
CONCLUSION
In the near term, it looks like smooth sailing, but with some head-
winds as the aggregate medical professional liability line of business
seems poised to produce stable but less profitable results. Slowly
declining underwriting results that reflect rate erosion/moderate
loss cost trends across the industry—with no apparent help from a
volatile investment environment—suggests overall profitability will
follow the lead of underwriting results.
However, there do not appear to be any rapidly developing
storms on the horizon, although there are many possibilities. Surges
in frequency and/or severity could be brought on by many of the
phenomena noted, including: changes in patient attitudes toward
providers; changes in healthcare provider/patient interactions and
services due to, or independent of, healthcare reform; and changes
in the technology used in healthcare delivery. Any one of these, par-
tial impacts of all in combination or other unforeseen events, as well
as the possibility of broad-based erosion of tort reforms, could pre-
cipitate stormy seas.
It can be tough sailing into the uncharted waters of the future, so
keep your navigational aids at the ready. But for now, it seems
“steady as she goes.”
Paul A. Greve, JD, RPLU, is executive vice president/senior consultant in
the Willis Towers Watson Health Care Practice.
Alison M. Milford, ACAS, MAAA, is a senior consulting actuary with Willis
Towers Watson's Atlanta office.
MEDICAL LIABILITY MONITOR OCTOBER 2016 VOL 41, NO 10
7
Slowly declining underwriting results
that reflect rate erosion/moderate loss
cost trends across the industry together
suggests overall profitability will follow
the lead of underwriting results.