In the world of professional liability, we are now beginning to see a transition from a soft market to a hard market.  

The insurance market is cyclical, and often characterized as being either a “hard” market or a “soft” market, or in the process of transition from one market to another. Currently, the market is transitioning from a “soft” market to a “hard” market.  

We have been in a soft market for about the past 15 years.  Prices have remained relatively low, despite the annual increases in the Virginia Cap limits of liability.  Insurance buyers have seen flexible eligibility guidelines, more easily available coverage, and have had several options from which to choose from. 

Loss severity has begun to increase in the last few years.

Insurance companies are paying higher costs to defend claims and are seeing larger settlements and verdicts.  For a while, insurance companies were able to absorb increased expenses through their investments and surplus.  These costs have risen to the point where many insurers must adjust pricing to adequately cover these increasing expenses.  The MSVIA is being advised by some professional liability companies that they will begin making adjustments in pricing or underwriting guidelines.

How will these market changes affect me?

All of our companies are experiencing these changes to some degree, however each company is unique. 

Some general signs of the market hardening include:

  • Increased premiums, via rate increases or cutting back on discounts.
  • Stricter underwriting standards, asking more questions about new procedures, providers, part-time status, etc.  This may require more lead time for getting approval.
  • Requiring more documentation, such as renewal applications, proof of past insurance, or loss histories

Details on Hard and Soft Markets

Soft Market

Medical Professional Liability (MPL) insurance has been in a Soft Market Cycle since 2005—the longest soft market we’ve experienced. Coverage has been widely available, policy terms relaxed, and priced-based competition common.

  • Rate increases and stricter underwriting criteria, from the previous hard market cycle, lead companies to become profitable again.
  • Companies loosen their underwriting standards, become more flexible, and reduce premiums further as more companies fight for market-share.  
  • Investors see medical malpractice as profitable and pump in new capital.
  • Additional companies enter the marketplace resulting in increased availability.

Hard Market

In a Hard Market Cycle, insurance becomes less available, policy conditions tighten, and premiums increase. 

  • Claim frequency and/or severity increases and current rates are unable to sustain the losses.  
  • PL insurance companies are losing money and profits are down.
  • Underwriting standards become more stringent as companies seek to reduce claims.
  • Rate increases are implemented.
  • Capital dries up as investors withdraw funds due to financial losses.
  • Commercial companies / Non- Medical Malpractice specialty companies flee the medical malpractice line of business, or companies merge or go out of business, resulting in decreased availability.

How is MSVIA responding?

MSVIA's affiliation with the Medical Society of Virginia and our status as an independent agent means that our most important responsibility is to you, our client.  We will assist you in evaluating your coverage for additional discounts or ways to minimize cost, and will help you determine when it is helpful to consider looking at other carriers.

Not a client? Now more than ever, when you are considering options, it is to your benefit to work with an agency that puts physicians first.

If you are impacted by these market forces, we encourage you to consider the MSVIA as a resource by reaching out to us.