The liability landscape facing physicians is characterized by a persistent and evolving set of risks. Malpractice claims remain a constant threat, with allegations of negligence, misdiagnosis, delayed treatment or surgical errors leading to severe consequences, including costly lawsuits, irreparable damage to professional reputation and even the loss of a medical license.
The increasing demands for meticulous documentation, the continuously evolving standards of care and the growing complexity of patient conditions all contribute to a heightened professional exposure for physicians.
As the costs of healthcare continue their upward trajectory, these liabilities have become a more significant financial risk for both individual practitioners and larger practice groups. This financial pressure is a key driver for a notable trend in the insurance market.
"We're seeing a shift of practitioners/groups who were previously on the admitted side come to the Excess and Surplus (E&S) side," says RPS Area Senior Vice President Kyle Pass. "We expect this trend to continue as standard markets take rate and creative solutions are needed."
This migration is driven by several factors. A major one is the expansion of services that providers are now offering to their patients. Elective procedures, the growing adoption of telemedicine and the practice of moonlighting — physicians taking on additional work or shifts outside of their primary employment — are all popular and growing segments of the market. However, admitted carriers, which operate in the standard, regulated insurance market, are generally hesitant to cover these exposures due to concerns about the unique risks, lack of consistent oversight and potential inconsistencies in care. Therefore, these emerging risks are increasingly finding their home in the E&S market, which has the flexibility to underwrite more complex and non-standard risks.
Specialties Feeling the Pressure
Claims severity is a growing concern across several medical specialties. This trend is particularly true in obstetrics and gynecology (OB/GYN), where the emotional and financial impact of birth-related injuries can lead to exceptionally large payouts. The same trend of increasing claims severity is also evident in other high-rated specialties such as neurosurgery and pediatrics. As a result, insurance rates in these areas will continue to be pushed higher to help offset the rising costs associated with claims, leaving physicians and their groups to find innovative ways to reduce their overall costs in the face of rising premiums.
The physician insurance market remains largely static, with a noticeable lack of new entrants willing to take on physician-related risks. The same established carriers continue to dominate the space, which limits competition and, consequently, innovation in product offerings. This lack of competition leads to inconsistency in policy renewals, making it difficult for physicians to predict their insurance costs from year to year. Carriers are also refining their marketing strategies to more effectively target these accounts. Physicians should expect to see "step factors" — a predetermined percentage increase in premiums for each renewal year — to continue impacting their costs. Rate increases will also be more heavily focused on higher-risk specialties.
In response to the financial strain on medical professionals, carriers are increasingly offering more flexible policy options. Physicians can expect to see continued creativity around deductibles, which can be structured to provide a greater share of risk in exchange for a lower premium. Similarly, insurers are exploring adjustments to coverage limits and other policy structures to ease the financial burden on medical professionals while still managing their own risk.
The Unique Challenges of Staffing Groups
One particularly challenging and high-stakes area is insurance for staffing groups. These entities typically operate on a national scale, providing medical professionals to high-risk environments such as correctional facilities, skilled nursing homes and other venues that most carriers are hesitant to underwrite. Because of their nationwide reach and operational model, they often fall outside the scope of the admitted market and are pushed into the E&S space.
However, their multi-state operations introduce a unique layer of complication. A handful of venues across the country require admitted coverage for physician liability along with mandatory enrollment in a state-specific patient compensation fund (PCF). E&S carriers generally can't provide this admitted coverage or PCF enrollment. This regulatory hurdle narrows the field of potential insurers to only a handful of carriers capable of writing comprehensive, compliant policies for these multi-state groups.
This high-stakes situation puts increased strain on the limited number of carriers willing to take on the risk and severely limits the alternatives for insureds.
"I think we're going to continue to see pain for the foreseeable future," Pass says. This dynamic is creating a significant squeeze on the entire physician insurance market. Until more E&S carriers can meet multi-state requirements and become comfortable underwriting the unique and complex risks of staffing companies, pricing pressure and limited coverage options will remain the norm for these specialized groups.
Hospitals Under Pressure
Not surprisingly, the liability issues facing individual physicians and private group practices are magnified for hospitals and similar medical facilities. The hospital market is further divided between large, urban medical centers and smaller, often rural hospitals, with each facing vastly different challenges in their liability insurance coverage.
Smaller rural hospitals are in a fight for their financial survival and are actively looking for ways to increase revenue and reduce overhead. The concept of the Rural Emergency Hospital (REH) was introduced in 2021 as a legislative solution to address potential financial shortfalls. The idea is that a more short-term facility would require less overhead and investment than a large, full-service hospital, making them more likely to remain economically viable in rural areas. Under the REH model, a facility cannot host any in-patient beds except for those in skilled nursing facilities (SNFs) and instead focuses on providing emergency outpatient care.
Beyond these legislative efforts, larger health systems are also coming in and buying up multiple smaller facilities to run under their umbrella, which can sometimes be more cost-effective because of economies of scale and centralized management.
Even large, well-funded hospital systems are now facing some of the same challenges that their smaller counterparts have dealt with for years. They're seeing nuclear verdicts — exceptionally large jury awards that can reach into the tens or even hundreds of millions of dollars. Abuse claims have emerged as one of the primary concerns driving these large verdicts. As a result, these hospitals want and need to purchase extremely high limits of coverage to protect themselves. While abuse coverage is available, some of the verdicts have become so large that they're pushing the limits of what insurance carriers are willing to handle.
In response to this trend, carriers are taking concrete action. For example, one carrier has created separate self-insured retentions (SIRs) for abuse claims versus the rest of the hospital's risks. For example, a hospital might have a $1 million SIR for general claims but a $10 million SIR for abuse. This structure forces the hospital to absorb a much larger portion of the financial risk for abuse-related claims.
Carriers are also reacting to these large verdicts by reducing the total capacity they're willing to offer on a single policy, reviewing their attachment points and increasing their premiums to account for the heightened risk.
Learn more about what's next for the Healthcare market in the 2025 Healthcare Market Outlook.
