There’s no denying that the past few years have been tough for health care organizations.

Doctors and nurses have been at the front lines of the COVID-19 pandemic. Many have faced burnout as they struggled to manage the intense workloads of the past few years. Additionally, many hospitals have struggled to remain profitable and are now navigating increasingly complex and severe liability insurance claims.

“Their financial margins were slim before the pandemic and are now even tighter as a result of the pandemic,” said Shellé Thompson, CPCU, product lead with the Bermuda health care division at Allied World.

As insureds navigate this challenging health care environment, some might consider other markets, for example Bermuda, as a potential place for risk transfer solutions, providing needed capacity for these critical organizations.

An Uptick in Claims Frequency and Severity

Shellé Thompson, CPCU, Product Lead with the Bermuda Health Care Division at Allied World

Health care organizations are bearing the dual burdens of increasing claims frequency and severity. In the era of nuclear verdicts, individual claims come with higher price tags and previously dormant claims are returning. Once considered a long-tail business, claims are developing at faster rates, putting additional stress on insureds.

“Unfortunately, right now in health care, you’re seeing an increase in claim severity and frequency,” Thompson said. “It’s like the perfect storm — new claims developing at a much faster rate and older, inactive claims are now redeveloping.”

The health care environment is currently experiencing substantial verdicts, high settlements and elevated life care plan demands.

“Allied World’s platform has the underwriting and claims expertise that can navigate these challenging market conditions,” said Thompson.

In this changing claims landscape, health care organizations must navigate dramatic increases in claim costs for both single event malpractice claims and related events alleging injuries to numerous individuals.  Claims involving multiple claimants commonly involve common allegations of improper conduct by professional staff or a series of unnecessary related surgical procedures. These related events may aggregate under applicable policy language and result in high overall settlements.  Allied World’s underwriting and claims teams are well experienced to assist insureds in best managing these excess exposures.

“We’re seeing larger settlements and verdicts with single claimant and multiple claimant matters,” Thompson said.

Jurisdictions all over the country, even those that were previously considered low hazard, are producing costly verdicts. In areas like Philadelphia or New Mexico, health care insurers have long expected larger jury verdicts, but now exorbitant verdicts are occurring all over the country. For example, one couple in Iowa received $98 million in a civil verdict for a medical malpractice lawsuit filed after their newborn suffered brain damage.

“We’re seeing large verdicts coming out of other jurisdictions that we used to consider low- or medium-hazard risk,” Thompson said.

Carriers Are Pulling Back Capacity

Faced with the twofold challenge of claims frequency and severity, some carriers may be reconsidering their appetite for health care liability exposures.

“There have been carriers that have exited health care,” Thompson said.

“As the market changes, carriers have to look at what coverages they are offering. Are they OK with these coverages and have they priced adequately for these risks?”

Some are responding by tightening policy limits, moving from offering $25 million to less than $15 million, for instance. Others are reconsidering what exclusions they need to adopt in order to remain profitable in the space.

“Historically, when brokers would ask to remove an exclusion, carriers would be open to consideration. But now they’re thinking twice and really weighing the risk,” Thompson said.

Why Health Care Organizations Are Turning to Alternative Markets to Manage Increasingly Complex Risks

To help navigate this tense claims terrain, many health care insureds are turning to other markets to help place some of their exposures. Many brokers may try to find Bermuda, U.S. and London placements for their clients to ensure a diversity of limits.

“We’ve been doing health care since the early 2000s and our appetite has been consistent,” Thompson said. “We’re still able to grow the portfolio and grow profitably because there’s still a lot of health care systems out there that need coverage.”

The health care division is supported by an experienced team of underwriters that is able to balance the carrier’s need for profitability and an insured’s need for capacity.

“It’s important for us to be adaptable, but also demonstrate underwriting discipline, because healthcare is traditionally a long tail business.” Thompson said.

In addition to providing risk transfer solutions, Allied World provides risk management support for interested insureds. “We are an access point for resources,” Thompson said. “We have a risk management team that provides services to our clients in various areas.”

The underwriting team works closely with both, this risk management division as well as the company’s claims team to ensure that they remain abreast of new trends and emerging exposures. “The beauty of Allied World is our collaborative approach,” Thompson said.

“We are in contact with claims almost weekly to see if we are asking our insureds the right questions. We consult with legal to ensure that our terms and conditions are tight, and to ensure that our terms and conditions clearly describe the coverage.”

 What’s more, Allied World is a reliable partner for insureds looking to place some of their health care liabilities exposures in the market. Since launching in the early 2000s, it has paid over $2 billion in claims for its North American Healthcare platform.

“We offer our clients resources to help during the claim process, such as proving a damage specialist to the defense team who has a sole focus on determining what demands are legitimate and what demands are out of the scope of the coverage,” said Thompson.

 “We are seeing some plaintiff attorneys use tactics that can be disruptive for businesses, such as demanding onsite ERM audits, requesting large volumes of defendants to be deposed – the list goes on.  Allied World can help navigate our clients through this difficult landscape, and we can offer experts in various jurisdictions to assist in our insured defense.”

To learn more, visit:  Healthcare Liability – Allied World Insurance

Coverage will be underwritten by an insurance subsidiary of Allied World Assurance Company Holdings, Ltd, a Fairfax company (“Allied World”). Such subsidiaries currently carry an A.M. Best rating of “A” (Excellent), a Moody’s rating of “A2” (Good) and a Standard & Poor’s rating of “A” (Strong), as applicable. Coverage is offered only through licensed agents and brokers. Actual coverage may vary and is subject to policy language as issued. Coverage may not be available in all jurisdictions. © 2023 Allied World Assurance Company Holdings, Ltd. All rights reserved.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Allied World. The editorial staff of Risk & Insurance had no role in its preparation.