Why a Hard Market Causes Rate Increases

In the past few weeks, I handled several medical malpractice renewals in which pricing was to go up substantially. The primary reasons stem from current and projected claim activity and the fact that we are in a “hard market.”

As Insurance Business Magazine points out, “a hard market is the upswing in a market cycle, when premiums increase and capacity for most types of insurance decreases.” In contrast, a soft market “is characterized by low rates, high limits, flexible contracts, and high availability of coverage.”

The insurance market is cyclical, rotating through soft and hard market periods over time. The following figure illustrates some of the typical factors that cause soft and hard market patterns.

They Insurance Soft and Hard Market Cycle

Larger and more severe claims in recent years are taking a toll now. As the number of claims overall has gradually lowered and leveled off since 2001, the severity of these clams has steadily risen, which is a hard market influencing factor. We can see this clearly as indicated by the red line in the bar graph below.

Increased severity causes a hard market.

To summarize, you will typically find these conditions during a hard market:

  • Increases in the frequency and/or severity of claims
  • Fewer insurance companies in the market
  • More burdensome regulations on insurers
  • Lower investment returns for insurers
  • Stricter underwriting and reduced coverage
  • Higher premiums

Fortunately for my clients in the cases mentioned above, I was able to help. In one situation, I negotiated premium credits for a group of physicians. In another case, I am moving the policy to a different company that’s willing to reduce their pricing without compromising coverage.

Why the Hard Market Now?

We know that Covid-19 is playing a role this time around due to future claims’ unpredictability. As earlier indicated, the severity of claims is way up and continues trending that way. Societal conditions leading to more lawsuits are causing higher losses and claims among insureds. Increasingly proactive litigation leads to higher and higher settlements. Resources at national and state levels have been redirected like never before, and insurance companies are concerned, causing their underwriters to cautiously choose the risks they will insure.

The year 2020 posed additional challenges including:

  • Property & Casualty net income after taxes dropped 27.5% in the first nine months of 2020.1
  • 19 Natural Disaster Events occurred in 2020 with over one billion in direct losses1
  • Insurers are bracing for Covid-19 related claims.2

Medical malpractice insurance is particularly troublesome because of the uncertainty of Covid-19 related claims.  We see the potential of “Failure to Diagnose” claims because patients could not see their doctors and delayed diagnostic testing. Looking back further, we see standard insurance companies losing business as healthcare providers join healthcare systems that provide insurance through a captive.  These unfortunate events leave fewer doctors for traditional carriers to insure which leads to reduced volume, lower profitability and rate increases.

How Can You Protect Yourself During The Hard Market Cycle?

Despite the hard market, there are still differences between carriers. Knowing who’s who and what’s what in coverages and costs goes a long way to mitigating the impact of malpractice insurance premium hikes. For example, doctors can earn premium credits for applying best practices, and we find savings for many by discovering they are already eligible for significant discounts.

Focus on Finding the Best Options

While we agents have no control over broad market conditions affecting premiums, we, who are willing, can do the research, the “shopping,” and the negotiation to find the absolute best coverage at the lowest cost available. That has always been a big part of our work at Perron Insurance because it’s one of the most effective ways to help protect physicians’ practices and income.

What does this mean for you?

For your upcoming renewal, I recommend starting the process early to obtain the best outcome. Research and analysis based on your specific needs are the key to success. I would be honored to review your coverage and offer recommendations to lower your premiums and avoid a hard market hit on your insurance costs.


I have over twenty years of experience specializing in obtaining optimal and affordable malpractice insurance for physicians to protect their assets and income.


Feel free to call me at (603) 926-1318 or send me an email so I can learn about you and your practice’s specific needs.


1.          Turner H. Property & casualty industry income plummeted in 2020 | PropertyCasualty360. Property & Casualty 360. https://www.propertycasualty360.com/2021/02/18/property-casualty-industry-income-plummeted-in-2020/?slreturn=20210212124214. Published February 18, 2021. Accessed March 12, 2021.

2.          COVID-19 Impact to Property & Casualty Insurance | Deloitte US. Deloitte. https://www2.deloitte.com/us/en/pages/financial-services/articles/covid-19-impact-to-property-casualty-insurance.html. Accessed March 12, 2021.

7 Costly Mistakes Physicians Make When Choosing Medical Malpractice Insurance

medical malpractice insurance coverage
We’ve worked with hundreds of physicians and understand that for them, obtaining medical malpractice insurance can be a burdensome task that neither you nor your staff are ever ready to handle.  Let’s face it, insurance coverage is not a desirable thing to shop for, but it is a “must have” for you that will protect your practice and your assets.  But it can be costly.  So, how do you decide what coverage and premium is right for you?

We know physicians sometimes accept medical malpractice insurance coverage from an insurance company, just because it offers the lowest premium.  After all, budgets are tight and, most of the time, they don’t think they will experience a claim. However, even though they choose coverage with the lowest premium, will this medical malpractice insurance coverage provide premium savings over time and cover them properly?

Throughout our experience, we have learned a lot after seeing insurance companies come and go in the market place.  The differences between them are significant and require an astute physician and practice manager to examine them carefully and figure out what’s right for them.  These differences include:

  • Coverage
  • Defense
  • Longevity
  • Financial stability
  • Overall premium

So, how do you know what’s right for you based on your budget and practice needs?

Insurance applications can be tedious to complete and we have found that many physicians skip questions and the remarks section due to lack of time and desire.  We know that underwriters review applications objectively by looking for the few pieces of information that would allow them to provide a quote.  But, what if there were a way to have the underwriter review your documents on a more personal and subjective manner where your quote is based on additional information you provide and specifically for your needs?

We decided to develop the “7 Costly Mistakes Physicians Make When Choosing Medical Malpractice Insurance and How to Prevent Them” free guide as a tool to help physicians and practice managers make better decisions when buying malpractice insurance coverage.  The information provided will show you how to select provide the right, cost effective coverage for your needs.




What is Malpractice Tail Coverage?

All About Tail Coverage Malpractic Insurance

What is malpractice tail coverage?  It’s surprising to see how many physicians are unaware of what tail coverage is until they are told they need to purchase it.  How does this happen?

Tail coverage malpractice insurance provides the ability for an insured to report claims to their insurance company after a claims made policy ends.   With a claims made policy, coverage for any new claims for professional services rendered during the policy period ends upon cancellation.  Therefore, in order be able to submit claims to the insurance company, there would need to be an “extended reporting period”, also known as tail coverage malpractice insurance.  Upon policy cancellation, the insured will have the option to purchase this tail.  If obtained, the company will add it as an endorsement to the current policy.

Read more

Why Avoid a Rubber Stamp Renewal?

Why Avoid a Rubber Stamp Renewal?

Sometimes prospective new clients, who are approaching their medical malpractice insurance expiration date, find it easier to  just take the rubber stamp approach and renew the same old insurance policy for the new year.  After all, everyone is busy and this “rubber stamp renewal” approach might seem a good way to save time.  But, as in the poem below by Robert Frost, maybe it would be better to take the road less traveled?
Read more

How to Find Malpractice Savings Mid-Term

We are currently working with two physicians who have had significant changes in their practice since their medical malpractice coverage renewed earlier this year. An opportunity arose for one physician to work for a larger organization that would pay for her malpractice insurance. The other physician decided to perform a new type of procedure that […]

Telemedicine Malpractice Risks


Telemedicine Policy

Earlier this summer the AMA adopted an eight guideline policy motivated to improve access to care for patients using telemedicine. You can find the AMA Telemedicine policy here.

Read more

How to Participate in Healthcare Tweet Chats

In our previous blog on 3 Benefits of Healthcare Tweet Chats, we introduced Symplur, a company that organizes and tracks healthcare hashtags, tweet chats and conferences.  You can find a current schedule of tweet chats here.  Take a look around and, if any healthcare chats interest you, then this blog is for you.

 Benefits of Healthcare Tweet Chats

Tweet chats typically have two to three people that moderate each session.  For some, like #HCLDR (Healthcare Leader), the moderators create a pre-tweet chat blog that provides details, such as topic discussion, questions to be discussed and resource links on the topic. I personally have found these blogs helpful and I appreciate the hard work and time the moderators put into writing them.

And so, here is a shout out to Colin Hung @Colin_Hung, Bernadette Keefe, MD @nxtstop1 and Joe Babaian @JoeBabaian.

To get the most of healthcare tweet chats, we recommend you: Read more

Why You Should Care About Patient Communication

Patient Communication

Communication – My Story

In my work in providing medical malpractice insurance, I send emails or letters that give instructions to doctors and practice managers on our renewal process. Often there are application forms, additional documents required, and payments that may need to be sent to various locations.   Unfortunately, when I receive information back, it is not complete, there are missing documents, and/or payments are sent to the wrong address. I often wonder, “Am I not making this clear?” Read more

Medical Malpractice Policy Comparison

policy comparison

Why Perform a Policy Comparison?

Each year, physicians will either obtain new medical malpractice insurance coverage or renew their current policy. Sometimes it can be an easy renewal of the current coverage when a doctor is placed with a financially stable company that provides excellent coverage and pricing. Other times, however, physicians need to evaluate their current practice and review a policy comparison so they can be sure they purchase the right coverage at the right premium for their needs.
Read more

What a Hidden Arbitration Clause Really Means

Arbitration Clause

Arbitration Clause and Consent to Settle

One of the best phrases to see in a Medical Malpractice insurance policy is “Consent to Settle”. This phrase suggests that your insurance company’s defense will seek your approval if a claim settlement is presented by the plaintiff. What if there are other terms in your policy that could change the effects of your Consent to Settle? Consider the Hammer Clause, as we discussed previously in this Consent to Settle blog.  Another term we’ve noticed with more frequency is the Arbitration Clause, which unfortunately, has the potential to wash away your consent.

Arbitration Clause Definition

According to Wikipedia, “An arbitration clause is a clause in a contract that requires the parties to resolve their disputes through an arbitration process.”

So, in medical malpractice policies, this clause defines the defense process should the claim be brought to arbitration but also redefines your Consent to Settle clause. Let’s take a look at actual defense clauses from two medical malpractice policies.

Policy 1 – Does not contain the Arbitration Clause

Defense and Settlement

The Insurer may make any investigation it deems necessary and may, with the written consent of the Named Insured, make any settlement of any Claim.

Clearly, within this policy, there is no arbitration so this exhibits pure Consent to Settle. The insurance carrier must obtain your approval prior to settling a claim. Period.


Policy 2 – Contains Arbitration Clause

Defense of Claim and Settlement

Insured’s written consent to settle any Claim if the Insurer believes that settlement is proper. If the Insured withholds consent to a settlement recommended by the Insurer and acceptable to the claimant, the issue shall be submitted to binding arbitration pursuant to Section XVI.

– – – – Several pages further in the policy . . .

Section XVI

Arbitration Clause

Solely in the event that the first Named Insured withholds consent to a settlement recommended by the Insurer and acceptable to the claimant, it is agreed by the Insured and the Insurer that this issue will be resolved by submitting to binding arbitration.

The policy goes on to discuss the process of arbitration, then states:

Where the recommended settlement is found by a majority of the Arbitration Panel to be reasonable under the circumstances, the Insurer shall have the right to enter into such a settlement without the first Named Insured’s consent. If a majority of the Arbitration Panel determines that the recommended settlement is not reasonable under the circumstances, the Insurer shall not have the right to enter into such settlement without the first Named Insured’s consent.


Ramifications of the Arbitration Clause

At first glance, this second policy appears to have the same full Consent to Settle. However, the second sentence states that if you do not consent to the offered settlement, the case will be brought to arbitration, which is an alternative dispute resolution method. The ending of that sentence refers you to another section, where you must search for further in the policy. In reading this section, it indicates that if the Arbitration Panel believes the settlement to be reasonable, that becomes the final decision of the case and your right to consent is withdrawn.

When reviewing your policy, we recommend you always read the Defense language carefully. Some policies contain fine print allowing arbitration to settle the dispute, which may favor the insurance company. Always look for your best interest.

Do you have any coverage concerns about your malpractice policy or questions about this blog? If so, please comment below.