Best’s Market Segment Report: US Medical Professional Liability Underwriting Results Pressured by Evolving and Complex Landscape

OLDWICK, N.J.--(BUSINESS WIRE)--Although net after-tax income for AM Best’s medical professional liability (MPL) composite improved in 2024 for a second-straight year, the composite reported further deterioration in underwriting results, according to a new AM Best report.

The Best’s Market Segment Report, “Medical Professional Liability Underwriting Results Pressured by Evolving and Complex Landscape,” states that growth in loss and loss adjustment expenses (LAE) outpaced premium growth in 2024, leading to the composite reporting an underwriting loss of $586 million for the year compared with a loss of $395 million in 2023. This result represented the MPL composite’s 10th consecutive year of underwriting losses. However, in terms of bottom-line operating profits, the composite’s net income grew for the second consecutive year, including a 155% year-over-year increase in 2024.

Claims severity continues to rise and has been negatively impacted by nuclear verdicts, which are driving higher settlement demands, as well as the erosion of state tort reform. Even in states with caps on non-economic damages, according to the report, economic damages are rising.

“Social inflation, life care plans, jury anchoring and litigation financing are often cited as contributing to the rise in excess verdicts, and jury attitudes are also trending in favor of larger damages awards for plaintiffs,” said David Blades, associate director, Industry Research and Analytics, AM Best. “As social inflation persists and results in higher ultimate incurred indemnity losses, underwriting results may be impacted further if pricing doesn’t keep up.”

The MPL composite’s pretax operating income grew by 8.7% in 2024 to $1.1 billion, driven by a significant increase in net investment income as many insurers continue to take advantage of higher interest rates. Along with very large increase in realized capital gains, this more than offset the deterioration in net underwriting results and resulted in the composite reporting net income to $2.1 billion in 2024, which was more than double over the previous year.

The report notes that in a post-pandemic and data-rich world, health care delivery continues to evolve as risks increase in complexity. AM Best’s analysis of its composite considers that most rated MPL insurers demonstrate strong capital positions, positive cash flows, substantial invested asset bases supported by ample liquidity and sound risk management programs. MPL carriers have leveraged their significant capital position to invest in innovation, provide value-added services, educate insureds on best practices and utilize data to promote effective practitioner solutions.

“While MPL insurance has historically been a slow moving, compliance-heavy space—that is changing quickly,” said Sharon Marks, director, AM Best. “Rather than just selling protection, current MPL players are becoming strategic partners—leveraging AI, real-time data and external partnerships to deliver more proactive, bespoke solutions. The future of MPL insurance is not just about tinkering with legacy business models, it’s about constructing a whole new foundation.”

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=353747.

AM Best will host a complimentary analytical briefing on the state of the U.S. medical professional liability (MPL) insurance sector today, May 13, 2025, at 11 a.m. (EDT). To register, please go to http://www.ambest.com/conference/ABMPLI2025/index.html.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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