Rates for property & casualty, professional liability and other crucial insurance risks for the healthcare industry are set to increase in the US in 2013, according to Peter Reilly, healthcare practice leader at William Gallagher Associates Insurance Brokers.
He predicts that accounts with losses will see price increases and those without losses can expect little better than a ‘flat’ renewal. This follows a nearly decade long soft market that has left insurers unsure how to operate in a less price friendly environment.
He says the hardening of the market is a necessary response to diminishing investment returns.
“Investment returns are not there and haven’t been for the past several years and so those pressures are coming to bear on insurance companies, which means that insurers will look to make money through underwriting instead,” he said.
He commended the transparency of some insurers with regard to this decision.
“Chubb Insurance is doing a very good job here in the US of putting out early what their expectations are on their D&O book, healthcare and everything else. In some instances they’re being very candid and upfront, saying that they’re looking for increases north of 25%. I think that’s very admirable because they’re telling their markets: you’ve been under priced and we need to get more if we’re going to continue.”
He added that despite the general rise in premiums there is still an element of competition as a result of new players entering the field of healthcare insurance, although typically these are established players who are seeking to broaden their offering.
“Mostly they are carriers that have been around for a long time but have really stepped up their appetite for healthcare,” he said. “You’ve got a number of carriers – the traditional physician markets in the US such as Medical Protective, The Doctors’ Company, ProAssurance, and a number of dominant regional players such as Coverys all now looking to write institutional risks, not just traditional physicians’ risks. So while they’re not new players if you look at how long they have been writing healthcare, they are expanding what they will write and therefore I would characterise some of their appetite as new.”
As buyers negotiate rising rates and new players, Reilly predicts that the process of buying insurance will become more focused on the relationship between the buyer and the underwriter, with the broker serving as matchmaker.
“I think my particular community – the brokerage community – has done a poor job of connecting the clients with the underwriter and they’ve tried to pretend that we the brokers can be all things to all men. We are not underwriters but it is our role to be their counsel and their advisors. I think buyers of insurance need to meet and talk with their underwriters. It’s a bit of a return to the old Lloyd’s model of sitting across the table from your underwriter and having a good old fashioned conversation.”
healthcare industry, William Gallagher Associates Insurance Brokers, Investment returns, Chubb Insurance