Medical Malpractice, why a close relationship with insurers is key 2 Sep 2009
A close client relationship is key to insurers’ success in the medical malpractice market, says Alex Wakeley - an underwriters from Marketform.
Each country or region has a unique medical malpractice profile, and the issues and risks vary widely, making it challenging to talk about the state of the global market. Geographic variations will also apply as a result of, for example, too much underwriting capacity or local legislation. The medical malpractice market is defined by a number of serious long-term insurers who are prepared to build strong relationship with clients. Others may periodically enter the market but tend to pull out when high value claims are submitted.
The UK market is currently characterised by an overall softening of rates, mainly caused by increased competition from other liability insurers diversifying for what they believe is expedient premium.
The nature of medical malpractice cover is long term. A baby palsy case may continue for up to 20 years if the insurer needs to handle any liability for the insured, normally a corporate institution such as a clinic or a hospital. Bespoke policies are the key to success in this rapidly developing market.
In terms of underwriting, to satisfy brokers an insurer must be prepared to accept a wide range of risks, rather than cherry-pick, and actively offer diversified cover. For example, insurance for foster care agencies, working with brokers who specialise in aesthetic beauty treatments or insuring medical facilities on cruise ships.
Sharing knowledge where possible with clients, including overseas experience, together with in-house risk management can also play a vital role. Having claims, legal and medical expertise in-house enables the adjustment of claims more accurately, faster settlement and a reduction in the pressure on clients by being able to act for them in court cases.
Insurers must keep up to date with what is happening round the world, for example, in countries like Australia and regions such as Asia, Eastern Europe and the Middle East. Experience of crises such as SARS, which affected the Far East and the response in setting up emergency facilities, could benefit other countries, not least with the World Heath Organisation declaring swine flu a pandemic in May this year.
Flexibility is another feature of any underwriting-led approach, where insurers may initially feel that a risk is high but, by carefully monitoring claims and working with clients, they can establish that the risk profile is lower than expected and therefore offer lower premium or wider coverage.
In terms of higher risk areas, obstetrics, orthopaedic and neurology claims tend to be the most costly. The growth in aesthetic procedures also requires careful underwriting. Some people undergoing cosmetic surgery are going to be hard to please as they have unrealistic expectations. They need to be managed and proper consent information must be obtained. It is not surprising that this is a growing area of litigation, from basic beautician claims to large plastic surgery complications.
Most claims today are about failed expectations. When it comes to ‘looks’ individuals often have higher expectations than are justified concerning the outcomes of a treatment. There has been an increase in ‘dissatisfaction’ claims where a commercial judgment to defend or settle may have to be made. Unless an individual has been given a guarantee about the outcome of a treatment, or has before and-after photos, then such claims will not stand. However, in some circumstances ex gratia payments are appropriate.
Another emerging area is insurance for out-of-hours and other contingent cover for general practitioners (GPs). The NHS initiative to deliver more first-line cover through GPs means that they are offering more and more services and treatments with associated contingent risks. Some of these practices are now multi-million turnover businesses.
A significant amount of medical malpractice business is with corporate entities covering these contingent risks. Doctors normally have to take out their own cover, usually through medical defence organisations (MDOs). Again, insurers must develop close relationships with MDOs to cater for their specific needs.
Far from decreasing demand, the current economic situation and changes in exchange rates are yielding opportunities. There has been a steady growth of business in the UK, although there is some evidence of rates flattening in some areas. The credit crunch appears not to have adversely effected what people are willing to pay out for plastic surgery and other aesthetic beauty treatments. This, however, remains a contentious area for claims.
Treatments are evolving all the time which means insurers must have the expertise to assess these risks. Important sources of information about the implications of certain forms of treatment are the manufacturers or providers of drugs or other materials used.
The beauty industry has grown tenfold over the last five years. Treatments are evolving all the time and have become much more invasive. Airbrush tanning is becoming increasingly popular as a result of the perceived cancer risk from sun beds. Cover for a vast number of beauty treatments is available, ranging from chemical peels, aromatherapy, Botox, laser treatment and waxing. Teeth whitening has become a popular trend, and additionally from the aesthetic side, insurers may be asked to over surgery clinics that deal with breast augmentation, tummy tucks and rhino plasty.
Insurers also need to be aware of and underwrite for adverse outcomes of what at face value may be regarded as routine treatments. For example, in 2007 one of the largest reported compensation awards for routine liposuction of £300,000 was paid as a result of a serious blood infection. The point here is that the insurer must build up and maintain detailed specialist knowledge, preferably in-house, of such adverse outcomes and causations in order to underwrite effectively and profitably.
Another area of growth, encouraged by the current strength of the euro against sterling, is in medical tourism to the UK, particularly from Ireland. This is in conjunction with the flow of medical tourists from the UK to the Far East for holidays combined with laser eye treatment, for example. Many insurers do not provide cover for the travel companies that are promoting such holiday/treatment plans, but this does provides an opportunity to offer cover for the overseas clinics providing the treatments.
When considering writing in an overseas territory, it is important to establish a panel of legal/medical advisors to ensure the fiscal and inflation issues are understood, and that the impact of local legislation and how the courts work, particularly in assessing claims, are fully appreciated.
A specific problematic area often overlooked is where clinics fail to keep accurate records of treatments conducted for the required 10 years, or employ doctors to carry out treatments from abroad who do not have appropriate qualifications. The UK is a preferred location for overseas medical professionals to gain experience but this means that insurers need to ensure that contact details are retained and updated after the individual has left should a claim arise associated with treatments they have provided. This is because the insurance contract is with the clinic/corporate, they are vicariously liable for the actions of anyone they employ, so accurate record keeping will greatly influence insurers’ decision whether to offer cover and the level of premium charged.
This again is where solid relationships with clients come into play. Medical malpractice insurers need to know their clients well, the treatments they offer, their standards of delivery and record keeping so that they can create bespoke polices to meet their needs.
**J Alex Wakeley, underwriter, medical malpractice, and director, Marketform. This article first appeared in the CII’s ‘The Journal’ and has been reproduced with permission from Marketform and the CII.**