Cyber seen as growing risk among healthcare professionals and practices
First, the good news: Medical malpractice claims are steady to declining. According to Willis Towers Watson, the healthcare professional liability market was stable in 2017.
Now for the bad news: There’s an increasing trend that is poised to be the next big claim driver in the market, and that is cyber liability.
Welcome to the new medical professional liability landscape.
According to The Doctors Company, 80% of physician office practices and 90% of hospitals employ electronic health records (EHRs). Digitizing records has its conveniences, of course, but doing so comes with plenty of risks. Medical formularies not being up to date, incomplete patient health records, system failures, missing labs, and lack of system integration have been cited by The Doctors Company’s study as contributing factors to an increase in claims.
Practitioners are “exposing themselves to breaches, hacks and cyber terrorism because there is nowhere in the world to get more information about a person than their health records. Additionally, patients want more digital communications, which increases the risk of exposure” to cyber events.
Senior Vice President
MagMutual Insurance Company
Risks and market conditions
Risks related to electronic health records and other digital data, while making inroads, have yet to impact significantly the medical professional liability market. In fact, experts say that in the past decade fewer claims have been filed than in previous decades. Mike Beckett, senior vice president of MagMutual Insurance Company in Atlanta, Georgia, says the reduced number of claims has increased competition in the medical professional liability market. “Overall,” he says, “pricing is still at record lows, which is good for physicians.”
Another change Beckett has seen involves a shift in healthcare delivery. “Healthcare is being delivered in a different manner,” he explains. “It’s more B2B now. Independent physicians are on the decline, with the majority turning to employment with large systems and hospitals.”
Sherry Ihling, senior brokerage underwriter and P-C coordinator for J.M. Wilson Corporation, an MGA and E&S broker in Portage, Michigan, says that, with the steady market and a desire to compete on premium, there are no large pricing increases coming from carriers at the moment. Any premium changes, she says will most likely occur at renewal time.
“We will see small movements to increase some renewals,” she explains. “If the insured has claim activity, there could be an increase in premium we can work with and/or sell, as the claim history would warrant an increase in premium.”
As for the availability of coverage, Ihling says there’s no shortage. “There are currently a lot of markets that will consider medical professional liability. However, the pricing is pretty similar with all of our markets.”
In the work her company does with the allied health market, she is seeing more requests for increased limits. “Some carriers are responding to that, but we are needing to approach excess markets,” she says. “Until recently, this was a tough go, but we are seeing some carriers now considering excess over medical professional.”
She says this has been very helpful of late, “as some carriers cannot consider the higher limits in the contract requirements being presented to the insured.”
Claim drivers, says Beckett, tend to be linked to unexpected outcomes, which he points out are resulting in sizable damages. Also, he notes, bad bedside manners, poor customer service, and lack of transparency are driving claims.
Also part of the mix are claims stemming from regulatory compliance, which include Medicare/Medicaid audits, HIPAA violations, and cyber breaches, he adds. “We’ve seen some extraordinary judgments,” he says, “and that is not atypical for medical malpractice. Agents and brokers cannot avoid settlements, but they can advise clients on having appropriate coverage and adequate limits and on avoiding any potential coverage gaps.”
With medical malpractice being less of an issue for the healthcare industry, the focus is shifting to other potential risks. In particular, Beckett sees the Medicare Access and CHIP Reauthorization Act (MACRA) becoming a hot topic of conversation. In November 2017, the Centers for Medicare & Medicaid Services published its final rule on the 2018 Quality Payment Program, authorized by the MACRA. The rule affects practitioner performance and more.
“Health systems are more concerned about MACRA, negotiating with payers, making sure physicians are staying motivated to practice medicine, and dealing with patient frustration about rising costs,” he notes.
Then there’s the cyber liability issue. The expanded use of technology in healthcare, which is driving changes in the way hospitals and physicians practice, is resulting in practitioners “exposing themselves to breaches, hacks and cyber terrorism because there is nowhere in the world to get more information about a person than their health records,” Beckett says. “Additionally, patients want more digital communications, which increases the risk of exposure” to cyber events.
Ihling says that, due to the sensitivity of the information being housed in medical practices, a cyber option is offered as standard practice on a number of the quotes her company provides. She sees cyber liability being requested more within contracts that are being presented to insureds.
For agents and brokers, she believes this can be a hidden benefit. “This offers a great opportunity to provide another option to the agent to present to their insured,” Ihling explains, “and we should be presenting it as an option as an E&O protective measure.”
Advice for agents and brokers
While malpractice claims are declining, the emerging issues of cyber liability involving patient information and electronic records will continue to grow, say the experts.
The opportunity to grow a book of business is also increasing. “Some of our agents have developed medical professional business as their specialty within the agency and specifically market this line of coverage for their book of business,” Ihling says.
While data breach is being offered by carriers as an option, Ihling says her company is providing agents resources and support to establish the specialty within the medical professional liability line of business.
With or without specialization, the emerging cyber liability trend is one agents and brokers need to be embracing. “Agents, brokers, and companies should be talking to all of their clients about cyber coverage,” says Beckett.
For more information:
MagMutual Insurance Company
J.M. Wilson Corporation
Lori Widmer is a Philadelphia-based writer and editor who specializes in insurance and risk management.