MICRA – The E&S Perspective
December 19th, 2022 | 5 min. read
By David Huss
In a previous article, I focused on the ramifications of MICRA changes primarily as it relates to admitted med-mal writers in California who insure the vast majority of the state’s physicians and healthcare facilities. In this article, I focus on the excess and surplus (E&S) insurers active in the state that focus on writing either non-standard healthcare risks or risks that the admitted medical malpractice carriers otherwise don’t have an interest in taking a chance on.
The Admitted Advantage
Admitted carriers writing most classes of medical malpractice insurance often have one thing E&S carriers don’t have – a book of business large enough to provide credible modeling data with which to determine what they can expect from market changes, such as that imposed by the MICRA modifications that take effect on 1/1/23. Even in the hardest of markets admitted carriers will typically write the bulk of med-mal risks in their chosen target specialties/classes of business. The result? It is rare for an E&S carrier to write enough of a particular kind of healthcare risk in any one state (let alone county) for long enough to be able to develop credible modeling capabilities.
The E&S Advantage
Compared to carriers writing med-mal on an admitted basis, E&S carriers have much more flexibility to provide coverage terms/conditions and pricing they think is appropriate to any particular risk. This is because they are not limited by a filing with the department of insurance that dictates what their mature premium is for a particular kind of risk, what their claims made step factors are, what their credit/debit application methodology is, etc.
In short, E&S carriers have maximum flexibility to put up a proposal they think makes sense for their medical malpractice insurance program. If they want to write healthcare professional liability business in California, just about the only challenges they have are competition and the insured’s ability/willingness to pay the premium.
What’s the E&S Reaction?
Based on numerous conversations with our underwriters the general answer is… wait and see.
Okay, so the results of my conversations with E&S med-mal underwriters are a bit more nuanced than that. After all, we are only a couple of years into a firming trend after a 16-year slog through a continually softening medical malpractice market. Some carriers managed to come through that difficult period with healthy books of business. Others, not so much. A few didn’t make it at all. And, of course, now that premiums are on the rise again there are new entrants on the med-mal scene that don’t have any legacy issues they need to deal with.
And so responses by E&S markets to the recent MICRA modifications are a mixed bag. Most advise they are going to wait and see how things go, with an eye towards taking rate when they can. Others advise they plan to take significant rate increases starting 1/1/23. Still others advise they will pull back selectively, with a focus on specific classes/specialties and/or jurisdictions.
Notably, one thing I haven’t heard from E&S markets is any mention of pulling out of the California medical malpractice market. Why? Because it is generally agreed by those in the med-mal arena that the MICRA changes will result in a meaningful increase in E&S opportunities. California represents an enormous medical malpractice market, and so an increase in E&S opportunities there represents a significant business opportunity for E&S carriers. There’s premium to be written and perhaps money to be made, and carriers definitely don’t want to miss out.
Questions Yet Unanswered
The new MICRA has created much uncertainty in one of the largest medical malpractice markets in the U.S. Only time will provide answers to the questions associated with this uncertainty.
- Will admitted carriers be able to adequately increase premiums within the context of their current filings?
- Will the California DOI be open to reasonable rate increases by the admitted medical malpractice writers in the state?
- To what extent will med-mal claim frequency increase in California?
- Just how many healthcare providers and medical facilities will be relegated to the E&S market?
Here To Stay
Regardless of the answers to these questions one thing is for sure - you can count on a robust E&S presence to help provide the medical professional liability needs of the healthcare industry.
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