Onward and Upward in Today’s MPL Market

Introduction

Who doesn't love a hard-won success story? Rocky Balboa, Pete "Maverick" Mitchell of "Top Gun," and real-life comeback stories of individuals in so many walks of life who overcome adversity to reach new heights. In today's blog, I'm not referring to a person, but rather the current medical professional liability (MPL) industry which has bounced back from the aftermath of Covid, healthcare staffing challenges, and hospital consolidation to see many of its industry members emerge with healthy balance sheets and good asset surplus levels. But what's behind this turnaround, positive trajectory, and (for now) happy ending?

The MPL Backstory

Roughly four or five years ago, rating agency AM Best had flagged several MPL industry concerns, including tort reform challenges, the shrinking pool of solo practitioners, continuing economic uncertainty, equity market volatility, and rising reinsurance costs.[1] When COVID arrived in 2020, experts within the industry, finance, and insurance sectors expected an avalanche of claims brought against medical providers, given the new and virulent virus for which there was no known standard of care or cure. Although there were inevitable claims, particularly in the long-term care of the nursing home community, a real post-Covid avalanche never really played out.

Another significant plot line was the ongoing concern of a rates surge, potentially becoming as high as they were in the early 1980s when they reached closed to 18%. And while they certainly did go up a bit over the last couple of years, they also did not remain high for very long. So the impact on the cost of claims as well as investments was not nearly as dire.

Tort reform, which has remained an ongoing concern within the MPL industry, persists, but the good news is the MPL Association (MPLA), the national association representing the medical professional liability community, continues to coordinate and work with members nationwide to ensure that there is fair and impartial information presented in legislative and public policy venues. Through their efforts, the MPLA ensures that clinicians and healthcare organizations are treated fairly in the courts and throughout the claims process.

Positive Tailwinds and A Stable Environment (for now)

So much of the MPL industry's bounce back results from the strength of its members' financials. Almost all the companies in the MPL market remain financially strong, reflecting healthy balance sheets, good asset surplus levels, and interest rates that continue to firm up.

Staffing issues, a huge problem during and shortly after the Covid pandemic, have abated, so administrators no longer contend with a lot of APS, empty positions, or exorbitant salaries for temporary workers.

The Final Word

Will the MPL industry continue its positive trajectory? AM Best's recent outlook revision from Negative to Stable would certainly suggest as much.[2] The good news for market players is that the MPL industry is still experiencing upward momentum and smooth sailing, whose overall resilience and ability to adapt to market cycles may just ensure a long-term upward - and happy - ending.

For more information on the MPL market, listen to the Sapiens Insurance 360 podcast, "The Road Ahead: MPL 2024."

[1] Market Segment Outlook, US Medical Professional Liability, AM Best Market Segment Report, 2023, pg. 1

[2]Ibid.

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