Despite the headwinds facing the industry — from growing economic instability, to increasing labor costs, to rising inflation — the Healthcare Liability insurance market circa 2025 is, by all appearances, in a good place. Premiums remain strong, carriers in some classes of business are behaving as if the future is bright, and growth continues. That assessment belies the reality of the market that is simmering under the surface, however.
"Healthcare as a liability line isn't unprofitable," says RPS Area President James McNitt, "but segments of it are approaching that level. I see a lot of loss runs and claims histories, and the behavior from carriers doesn't appear as though there's a focus on future profitability."
Among the looming marketplace pressures is simple profitability. Whereas a lot of other Property and Casualty (P&C) lines have seen more tumultuous movements up and down over the years, Healthcare has been a steady climb from a marketplace standpoint. Among the top 10 carriers with the most premium in this segment, a vast majority have been unprofitable for the past decade. Certainly, that unprofitability can't be sustained, driven by a focus on short-term profits over long-term gains and calendar year over accident year loss ratios.
Nuclear verdicts, for instance, aren't going away and in fact have become more common in recent years.
"We've begun to see a lot of mega-verdicts in the hospital space," McNitt says. "Records are being broken in every state across the country."
The hospital space has seen a recent wave of high-severity cases, especially around abuse claims, molestation and complex deliveries, which all still carry the biggest awards in court. Beyond those cases, the next round of mega-verdicts started showing up in behavioral health, social services and senior living, as plaintiff attorneys and healthcare liability professionals are shifting focus to these newer segments.
Part of this shift is the result of changing standards and expectations among juries. What was a "nuclear burden" a decade ago — any jury award in excess of $10 million — isn't that big of a deal anymore, as juries and the people who serve on them have become so attuned to seeing large numbers. It's simple inflation.
"A couple of years ago, you might have won $1 million in the lottery and would have been a major story," says RPS Senior Vice President Margaret Jacobs. "But now you see lottery winnings for $300 million, half a billion, and beyond. Juries don't think a settlement for a million dollars is enough."
What all of these trends mean for the year ahead remains to be seen, but one thing is clear: The Healthcare Liability insurance market is under pressure as of 2025. From nuclear verdicts to venue-driven concerns for claims cases, to the ongoing margin squeeze at healthcare facilities, the reality of the industry depends on which segment you're focused on.
"Hospitals versus allied healthcare, residential facilities versus physicians, the market varies across them," says RPS Area Senior Vice President Karen Bennett. "And even within each segment, there are venues in serious need of massive tort reform."
RPS Broker Kyle Pass agrees and says it's going to be an interesting next 12 months in the healthcare space due to regulatory uncertainty as well. For instance, semaglutides and other weight loss drugs are taking the insurance industry by storm, but carriers are hesitant with this exposure being so new and spreading so quickly.
For brokers, the focus for the remainder of the year is going to be getting out ahead of renewal data. The Healthcare Liability insurance market is still working through COVID-era renewals and dealing with elevated premiums following several years of rate increases. Unfortunately, claims continue to outpace even these elevated premiums. So, while insureds are probably paying more for their premiums today than they ever have before, those premiums may still be inadequate based on future expected losses.
"Our primary objective when engaging with the marketplace is to achieve the most favorable outcome for our clients, meticulously considering their insurance claims history, risk management protocols and internal procedures," says McNitt. "Nonetheless, it's crucial to set realistic expectations from the outset — especially in instances where there has been a recent substantial claim or unfavorable outcomes — as these circumstances may result in a more complex renewal process."
The ability of brokers to effectively narrate the insured's situation renewal circumstances enhances their capacity to justify the insured's actions, thereby facilitating the negotiations with carriers that any negative incidents are anomalies unlikely to recur. In most cases, the insured has implemented specific policies and risk controls to mitigate the risk of similar future claims.
McNitt concludes, "These narratives are highly impactful. The advantage of this marketplace lies in the presence of carriers who are receptive and eager to understand the insured's business. They're open-minded and interested in learning how the insured plans to collaborate with their insurance carriers to avert adverse outcomes in the future."
Learn more about what's next for the Healthcare market in the 2025 Healthcare Market Outlook.
