Medical professional liability insurance, sometimes known as medical malpractice insurance, is one type of professional liability insurance. Professional liability refers to liability that arises from a failure to use due care and the standard of care expected from a person in a particular profession, in this case a doctor, dentist, nurse, hospital or other health-related organization.
A medical professional liability insurance policy covers bodily injury or property damage as well as liability for personal injury such as mental anguish. The complexity involved in discovering negligence results in a higher percentage of premium dollars going toward defense and cost containment expenses. Medical liability insurers spend substantial funds investigating and defending claims where there is an adverse patient outcome not resulting from negligence.
Many insurers write on a claims-made form basis where a policy in effect at the time a claim is reported responds for the loss, regardless of when the error was made. The policy that was more popular in earlier times is occurrence-made which covers a loss that occurred during the policy period, regardless of when the claim was made.
The medical professional liability insurance market has occasionally experienced times of crisis, such as during the late 1990s, leading to high prices for policyholders. These times were marked by volatile changes in premium, declines in investments, rapidly increasing loss ratios as a result of increases in claims payments and defense and cost containment expenses, and the development of a large reserve deficiency. The NAIC publishes a report (Countrywide Summary of Medical Malpractice Insurance) that shows loss ratios were very high in the late 1990s, peaking in 2001. Loss ratios have since declined in recent years and prices have fallen.
Insurance regulators have evaluated the availability and affordability of medical professional liability insurance in the past, such as in the 2004 Report titled “Medical Malpractice Insurance Report: A Study of Market Conditions and Potential Solutions to the Recent Crisis.”
In order to better understand claims associated with medical professional liability insurance, some states require closed claims to be reported to the state insurance department. In 2010, a “Guideline for Implementation of Medical Professional Liability Closed Claim Reporting” was adopted by NAIC membership which made recommendations for implementing the NAIC Medical Professional Liability Closed Claim Reporting Model Law.
The NAIC Statistical (C) Subgroup studies issues related to medical professional liability insurance. The Subgroup is charged to identify the types of data that are necessary to properly evaluate the medical liability insurance market — including the frequency, severity and causes of loss — in order to evaluate regulatory and legislative proposals.