Q: We keep hearing that a medical malpractice insurance hard market is coming in Florida. What does this really mean and when should we be concerned?
A: The market cycle for malpractice insurance in Florida has fairly predictable cycles, with extreme fluctuations in pricing and insurers’ underwriting. For example, the late 1990s and early 2000s were similar to the current market cycle, which is the last bit of a “soft”, doctor-friendly section. As insurers lowered their rates and underwriting rules to fend off competitors throughout the last half of the 1990s, the rates became too favorable for the claims conditions. Within just a few years, the insurers were losing money as the claims trends became increasingly unfavorable. As a result, insurers started dramatically raising rates to stop the hemorrhaging of claims payments and they severely stiffened their underwriting requirements. Many just left the marketplace. Some 50+ insurers were offering coverage in 2000 in Florida and by 2003 the number was down to five or fewer that were really standing by the insured doctors. Many physician insureds in Florida were forced to go bare because the options for affordable malpractice coverage almost dried up. Doctors with claims issues were the most vulnerable, as their rates rose even faster or their coverage was non-renewed.
Unfortunately, we are headed for similar conditions in Florida’s malpractice market, I believe. The reasons for this are many, but they still boil down to the simple formula of the insurers not charging enough to cover the claims, which are rising both in severity and frequency, against their doctor insureds. I predict the claims trends will increasingly worsen because the Florida Supreme Court has basically gutted the 2003 cap on non-economic damages, which was heavily influential in bringing us out of the last malpractice-insurance crisis of the early 2000s. With 40+ insurers, at last count, now offering coverage to Florida doctors, you should choose wisely from which of those you want to purchase coverage since the market conditions will very likely become much worse in the next 18 to 24 months as we careen into a “hard” market. We recommend moving your coverage as soon as you can to a highly rated insurer, one of a handful rated “A-, Excellent“ or better by A.M. Best. Remember too that not all rating agencies are created equal and I consider A.M. Best the gold standard and the only rating group to really consider when comparing insurers.
Matt Gracey is a medical malpractice insurance specialist with Danna-Gracey, an independent insurance agency based in downtown Delray Beach with a statewide team of specialists dedicated solely to insurance coverage placement for Florida’s doctors. To contact him call (800) 966-2120, or e-mail firstname.lastname@example.org.