The US healthcare liability insurance market is experiencing mounting pressure on profitability, a tightening of capacity and increasing underwriting scrutiny across nearly all sectors. While the overall market remains stable, the days of irrational exuberance are fading fast as claims severity, social inflation and venue risk reshape expectations.

On the heels of the RPS 2025 Healthcare Market Outlook, the RPS Healthcare team hosted webinar, 2025 Healthcare Market Outlook: Navigating Pressure Points in a Shifting Landscape, to further discuss the state of the sector. Here are the highlights of the event.

Physicians and Staffing

Physicians are experiencing dramatic shifts, driven by rising claim severity (up 43% since 2015) and evolving medical practices such as telemedicine, elective treatments and care in alternative settings (e.g., correctional or long-term care facilities). Admitted carriers are pulling back on capacity, leading more business into the Excess and Surplus (E&S) space.

According to RPS Senior Vice President Kyle Pass, "We're seeing the traditional $2 million/$4 million or $3 million/$5 million limits quickly disappearing, and E&S carriers are stepping up to fill the gap."

Staffing exposures — including locums and allied health — as well as contractual complexities, telehealth exposures and multi-state risks remain persistent pain points. Locum tenens coverage, in particular, continues to fall into a gray area that many markets hesitate to address.

Residential Care

RPS Senior Vice President Karen Bennett outlined major challenges across residential care facilities, including senior living, behavioral health and human services. Underwriters are focused on how facilities manage resident safety, staffing and evolving patient profiles, especially as facilities are asked to house more diverse and often incompatible populations.

Financial stress is pushing facilities to fill beds with non-traditional residents, sometimes mixing vulnerable seniors with younger individuals facing mental health or addiction challenges. Mixing residents increases acuity levels, liability exposure and the difficulty of risk assessment.

"The biggest pressure is financial," Bennett said. "Every resident placed in every bed is a financial risk, and decades of data show that acuity directly correlates to increased liability."

Hospitals

According to RPS Senior Vice President Marge Jacobs, hospitals are experiencing heightened scrutiny, particularly hospitals that are growing rapidly or backed by private equity. The failure of the Stewart Health Care system following its aggressive expansion by private equity highlighted the dangers of financial overreach. Underwriters are now closely monitoring similar systems for red flags indicating operational strain, including those that reduce staff or defer maintenance.

Hospitals are also facing a growing wave of nuclear verdicts, including a $412 million verdict in 2023 and others surpassing $30 million for birth-related injuries and clinical errors. These verdicts are leading to reduced capacity, higher retentions and difficulty filling large towers.

"Hospital capacity is so challenged right now that some July 1 towers weren't completed," Jacobs noted. "That hasn't happened in decades."

Allied Healthcare and Social Services

RPS Vice President Breck Seitz offered a split view between the allied health and social services segments. For allied healthcare such as labs, imaging centers, home health and hospice, the market is favorable. New capacity is emerging, and competition is increasing, especially for accounts that haven't marketed coverage in years.

On the other hand, social services — particularly foster care, adoption, correctional care and youth behavioral programs — are under serious strain. Non-renewals, capacity reductions and tightening terms are common. Abuse claims and Hired and Non-Owned Auto (HNOA) exposures are seeing significant exclusions or retentions, especially for patient transport.

"If you have local nonprofits or franchises in these spaces, now is the time to get ahead of renewals," Seitz advised. "The standard market is shifting out, and E&S is stepping in, however, offering very different pricing and structure."

What the Future Holds for Healthcare Liability Insurance

Despite pressures across all sectors, James McNitt, Healthcare practice leader, emphasized that the healthcare market remains fundamentally strong, with success requiring a shift in expectations. With nine of the top 10 carriers unprofitable on a combined ratio basis over the past five years, capacity is being reined in, and pricing must adjust accordingly.

"From a capacity standpoint, this may be the first time in decades that insureds can't buy all the coverage they want. We're not sounding the alarm, but it is a reset," said McNitt.

For brokers, agents and insureds navigating this environment, the message is clear:

  • Start early on renewals.
  • Know your client's operations, claims history and contracts.
  • Understand how coverage has changed — and where to push for more.
  • Partner with specialized healthcare brokers who know the nuances of each segment.

A proactive strategy, underwriting discipline and a willingness to adapt to changing market conditions are required for success in 2025.