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Back in early 2018 I wrote about our deteriorating Florida malpractice insurance market conditions in these terms: “The edges are cracking but the core remains firm and determined.” I now would say even in these last nine months true signs of the hardening market are becoming more commonplace and widely talked about and accepted by experts in this sector. In our notoriously cyclical professional liability insurance market in Florida our favorable soft market conditions lasted longer than any other period, but now have come to an end. With an increasing number of plaintiff claims against Florida doctors, with new lawyers moving into the specialized field of suing doctors, and a sharp increase in large excess limits verdicts against doctors, we are seeing continued serious financial losses for a number of the popular insurers of our state’s physicians and surgeons.
Most insurers are now either filing for rate increases or raising rates by not allowing certain discounts on their policies, actions which do not require government approval as official rate changes do. These silent rate increases also help insurers effectively raise rates without alerting their competitors of their pricing strategies in this transition time from soft to hard market conditions.
Shortly we will receive the state of Florida’s independent study of the malpractice insurance market that is released every year in October by State of Florida’s Office of Insurance Regulation. Here are some highlights to remind you of the already deteriorating conditions highlighted in last year’s report.
1. The very important measure called the “combined ratio” of all of the top 20 insurers of healthcare providers and doctors in Florida worsened from 101% in 2015 to 104.7% in 2016, representing only the second loss for insurers in the last 13 years. If we break out just physicians and surgeons from facilities, then the insurers’ losses are even worse, at 121%, which means for every hundred dollars paid in premium the insurers lost $21. It is hard to make this up on quantity! (This does not factor in the insurers’ investment returns, which help, but in this low-interest-rate time their mandated conservative investments will not come close to handling such a high combined loss ratio.)
2. The top 20 insurers in Florida in this market on average had over an 11% direct loss of their surplus in 2016! They are almost literally throwing their money at the losses to try to stem the bleeding, but how long can they or will they keep that up?
3. In 2016 there were 3,173 claims closed with payments, up 14.7% from the 2,766 closed with payments in 2015.
4. For claims that were closed with payments, on average over $1.149 million was paid to each patient plaintiffs, for legal fees, and court costs. But here is the staggering trend: that payment amount in 2016 was an increase of 31% from 2015, and the 2015 amount was 34% higher than in 2014!!! These market cracks are deep and wide!
5. There are some rather-startling combined loss ratios of some of the popular insurers of Florida doctors. Remember, a 100% combined ratio is breakeven for an insurer before investment returns:
MagMutual: #2 insurer of doctors in Florida, with a 16% market share – 130.6% combined ratio!
So MagMutual was losing $30.60 dollars for every $100 collected in premiums per this study. In the last transition from a soft to hard market in the early 2000s MagMutual raised its rates 86% in one year on most of its radiologists insured in Florida, along with stiff rate increases on almost all of its other insured doctors. With its loss ratio this high many are speculating that they and other insurers with high loss ratios will be forced to raise rates dramatically again in the near future, or settle for losing lots of money each year in Florida insuring doctors, which most insurers cannot or will not tolerate.
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