What the medical liability crunch means for brokers

Rising claim severity is forcing insureds to cut back coverage, with some ditching $5 million limits in favor of more modest options.

Medical liability premiums in the US reached over $11.6 billion in 2023, according to the NAIC. But that growth masks a stressed market. Carriers are pulling out of high-risk states like California and Florida, tightening underwriting standards in response to soaring jury awards and escalating litigation costs. Incomplete claim narratives and poor submissions are further complicating placements, putting brokers and underwriters under added pressure.

For wholesale brokers like Dennis Fox (pictured), one of The Top Specialist Wholesale Brokers in the USA, who specializes in healthcare placements at Brown & Riding, the squeeze is palpable. A decade into the business, he’s juggling rising costs, evolving retailer relationships, and shrinking carrier appetite. From youth nonprofits to long-term care, placements are becoming more unpredictable.

“If they used to be purchasing a five-mil excess, they're usually coming to us asking for lower limit options, just due to the rising cost of everything,” Fox said.

As premiums climb, some clients are trimming coverage, while others with stronger balance sheets are taking on more risk - whether through higher deductibles or self-insurance - to manage the financial burden.

“Insureds are more focused on making sure it’s affordable to keep the limits they had - or cut down based on their contract requirements,” he said.

Submission gaps, regional pressures complicate placement

At the same time, submission quality is becoming more critical - especially in complex or high-severity cases. Fox noted that poor claim narratives, particularly for claims exceeding $50,000, are a common gap that can stall placements.

“Carriers will be asking for additional details, and that’s often the most commonly missed item on an account,” he said. “It’s usually the first thing an underwriter will ask about.”

Even in a highly specialized area like healthcare, brokers often see incomplete submissions.

“We come across some retailers that might not be as experienced in the healthcare vertical,” Fox said. “They’ll send over submissions with just accords and loss runs, but that’s not enough for our carriers. We usually have to go back and ask for a healthcare supplemental just to get the account cleared.”

Certain geographies add another layer of difficulty. California, for example, is a particularly strained environment for medical liability insurance. Fox pointed to challenges in securing coverage for hospitals and long-term care facilities due to increased loss frequency and severity.

“The number of carriers interested in writing those accounts is going down,” he said.

Long-term care remains a hard class of business overall, especially in California, where large carriers are pulling back from new business.

“There is capacity, but underwriters are not as aggressive - even when they say they’re writing in the space,” Fox said.

Other segments, like youth-focused organizations, are facing new pressure as well. Fox noted that nonprofit carriers who once covered youth exposures are now exiting the space, sending business into the excess and surplus lines market.

“There's large severity connected to any type of youth exposure, and the statute of limitations adds long-tail risk,” he said. “That’s a difficult placement right now.”

Litigation-heavy venues such as Los Angeles and San Francisco exacerbate the problem. Some carriers are pulling out entirely, while others are raising premiums and retention thresholds just to consider a policy.

“Those are really the lines being drawn in the sand,” Fox said.

Retailer relationships shape the wholesaler’s role

Despite the complexity of the market, the wholesaler’s effectiveness often hinges on collaboration with the retailer. Fox emphasized that the wholesaler is one step removed from the insured and depends heavily on the retailer to bridge that gap.

“The power we have is still really controlled within the retailer,” he said.

In some cases, wholesalers run the entire placement strategy - identifying carriers that can meet the insured’s needs, setting up TPAs, or offering risk management services. Other times, they simply provide added capacity for experienced retailers who already understand the space.

“It varies per account,” Fox said. “You can have the same insured, but depending on the retailer, the wholesaler’s role completely changes. It’s a little dancing game every time.”

An expanding market under pressure

All of this is playing out in a medical liability market that has grown significantly in recent years. The coverage spans physicians, hospitals, and allied health professionals, with the largest volumes concentrated in litigious states like California, New York, Florida and Texas.

The market is largely driven by specialized carriers such as The Doctors Company, Medical Protective, Coverys, ProAssurance, and MLMIC. Many health systems also operate their own captives or participate in risk retention groups.

After years of soft pricing, rates began to harden around 2019. Though claim frequency has declined, claim severity has surged, driven by social inflation and larger jury awards. This has led to persistent underwriting losses for some carriers.

States known for large verdicts and plaintiff-friendly courts, like Illinois and Florida, add to the volatility. In areas with reduced tort protections, profitability has become harder to achieve, with some carriers posting combined ratios of 100% or higher - further reinforcing the complexity of the placement environment.

Top states by medical liability claim payouts