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Best’s News & Research Service - September 06, 2022 03:25 PM (EDT)

Best’s Special Report: California Medical Professional Liability Writers Could Face Increased Loss Costs Under Reform Bill

  • September 06, 2022 03:25 PM (EDT)

Oldwick //BestWire// - A new California law aimed at modernizing the state’s longstanding Medical Injury Compensation Reform Act (MICRA) could yield moderate increases in loss costs for medical professional liability (MPL) writers, according to a recent survey of AM Best-rated insurers underwriting that segment.

The bill (Assembly Bill 35), effective Jan. 1, 2023, raises California’s cap on non-economic damages from the current $250,000 level to $350,000 for non-death cases and to $500,000 for wrongful death cases. Incremental increases will follow over the next decade, to a respective $750,000 and $1.0 million, subject to a 2.0% annual inflationary increase thereafter.

A new Best’s Special Report notes that AM Best has been monitoring this issue and working closely with its rated insurers in this segment to gauge their approach and the potential impacts of the bill on their business strategies, policyholders, profitability and overall financial strength. In July 2022, AM Best surveyed 14 of its rated insurers in this segment, which combined write approximately 63% of California’s MPL market.

“The changes envisioned in the bill could have ripple effects in other states, given that MICRA has served as a bellwether for tort reform across the country,” AM Best Director Sharon Marks said. “Absent federal reform, the insurance industry continues to rely on state tort reform laws to help mitigate and manage risk.”

According to the survey, a majority of insurers expect moderate increases in loss costs and commensurate increases in rate needs starting in 2023, owing to an expected rise in loss severity and frequency, as well as attorney fees.

“Insurers are concerned that regulators will resist approving much needed rate increases in a timely manner, until the increase in loss costs have actually flown through and dampened profits for a couple of years,” said Jieqiu Fan, senior financial analyst, AM Best. “However, most respondents were relieved that a compromise was reached and that this legislation finally resolves the long-debated cap on non-economic damages.”

To access the full copy of this market segment report, please visit .

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.

California Press Release A.M. Best Rating Services, Inc. Insurance Property And Casualty Insurers Medical Professional Liability

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