Medical professional liability claims are stable, but professional liability loss costs for hospitals and physicians are estimated to increase by 3% annually over the next few years, according to the latest Aon/ASHRM Hospital and Physician Professional Liability Benchmark Analysis.
Hardening markets are prompting healthcare organizations to maintain higher retentions, says Kanika Vats, FCAS, MAAA, MBA, director and actuary, and healthcare practice leader in the Global Risk Consulting, Commercial Risk Solutions division of Aon in New York City.
The trend of a 3% rise in the severity of malpractice claims, measured by the average cost of resolution, is higher than the 2% rise seen in recent years, Vats says.
“We think one of the key drivers for this has been the large jury settlements taking place in the last few years. On the frequency side of things, hospitals and providers have been doing a good job of managing the claims frequency. As a result of those efforts we see frequency remaining flat for the fifth year in a row,” Vats says.
COVID-19 may influence those numbers in the near future, she says. Courts were closed for months in 2020, delaying the progress of many liability claims, Vats notes, and that could create a bubble of fewer verdicts and settlements. Criminal cases also were delayed. Once courts resumed litigation, the criminal cases took priority over civil cases, she explains.
That could affect the expected 3% rise in professional liability loss costs for hospitals and physicians, she says.
“There was a backlog of civil cases, so that could have an effect on the data we will see from professional liability claims that are taken to trial,” she says.
From 2016 to 2019, there was a 50% increase in settlement amounts to some high-severity cases with a jury verdict of $5 million or more, Vats says. To combat that increase, one strategy is for the hospital to provide a settlement offer that is a fair value during the jury trial process and stick with it, she says.
“Defend that number vigorously. That number should be tied into the reasonable economic damage argument,” Vats says. “We’ve also heard of defendants finding success with offering high-low agreements to cap the minimum and maximum.”
(The report is available for purchase online at: https://aon.io/3mygWNa.)
- Kanika Vats, FCAS, MAAA, MBA, Director and Actuary, Healthcare Practice Leader, Global Risk Consulting, Commercial Risk Solutions, Aon, New York City. Telephone: (212) 441-1425. Email: [email protected].