Unfortunately for physicians, premiums paid for medical malpractice insurance will only increase over the next two years. These rate increases are happening across the board with hospitals, large clinics, and doctors in private practice being impacted, especially in the more litigious counties in the country.

Bill Reese, executive vice president of the professional medical division at brokerage firm Seeman Holtz, says we’re at the beginning of a bell-shaped curve. Premium increases get more drastic as the market moves up the curve. So, premiums should continue to rise until they reach their peak in 2022 or 2023.

He explains that the market, which has been soft since 2005, is now entering a hard market, during which rates go up to pay for claims. “Insurance carriers kept their rates low from 2005 until 2019,” Reese says. “But, rates began to increase 2 years ago as carriers took on more risk as they anticipated more claims and higher losses. As a result, some doctors are now seeing their renewal rate double or premiums increase by 20% or more.”

New physicians who graduated in the past few years have never experienced a hard market and so these rate hikes may come as a shock, especially when compiled with student loans and business debts. According to Reese, there are not too many options for doctors: “They can renew with what the market will bear, they can seek quotes from alternative carriers, or if they can’t afford the increased premium, they can take a retention or a deductible.”

The two main causes leading up to this hard market are:

  1. A majority of states (excluding Texas and California) repealed tort reform.
  2. Insurance carriers experienced higher loss ratios as both the severity average and the frequency average of claims increased.

Reese has been in this business for 45 years and remembers when physicians were being offered $10,000 limits, companies were being sued for more than that, and it resulted in company insolvencies. Now, generally, doctors purchase up to $1M in limits, which seems to suffice in most states, with the exceptions of those with patient compensation funds, mandated limits, and financial responsibility requirements.