Nurses, when compared to other fields, have had a fairly easy time with malpractice costs and coverage. Although there are only four companies readily offering liability insurance for nursing, the market remains strongly competitive and coverage is affordable, especially for employed nurses.
The “casualty” insurance market, which includes medical malpractice and other forms of liability, has seen prices lowering consistently for almost ten years. All signs point that this is coming to an end and pricing is beginning to rise again.
Liability insurance is considered “long tail” by actuaries. This means that policies purchased today have an uncertain value for a long period of time. Often times claims do not present themselves until two years after the event, major cases can find themselves navigating the court system for another five to ten. Because of this, mis-pricing of insurance can take years to present itself. And, when discovered, insurance companies find the premiums significantly off from where they need to be.
Because of this cycle, called “hard” and “soft” by insurance underwriters, pricing tend to dramatically rise and fall rather than closely following the rate of inflation. Another issue is that claims costs are primarily driven by medical costs, as everyone who pays for health care knows the rate of medical cost inflation has been running two to three times the standard rate.
Nurses should not expect any dramatic change in premiums or terms in the coming years, although this is very hard to predict and even more difficult to prepare for. The biggest thing health care providers, RNs and LPNs can do is ensure they have purchased “occurrence” based coverage.
Professional liability and medical malpractice are written on either an “occurrence” or “claims made” basis. Occurrence covers claims that originate from events that occurred during the policy period. If a registered nurse had purchased occurrence coverage her whole career and then stopped practicing all events would be covered.
Claims made covers claims that are brought during the policy period for events that happened at any time after the insured started purchasing coverage. This means that if a nurse stops practicing and had held claims made coverage, any claims made in the future would not be covered. This causes the purchase of a “tail” policy to ensure future claims from past events are covered. Tail policies are extremely expensive and are quoted at the current market rate. Buying claims made coverage now could lead to surprises later when the premium is quoted.
The structure of occurrence policies allow for other transitions as well. The need for a new policy with higher limits, a change in state or practice area could cause a registered nurse or licensed practical nurse to need to purchase a new policy. Moving from one occurrence policy to another is seamless, moving from one claims made policy to another likely will require buying a tail.
In conclusion, the market is likely to change. Although it is not likely to impact nurses materially the possibility is always there. The one thing nurses can do to prepare is the ensure that they buy occurrence coverage. Claims made is often cheaper, but the cost savings could come back to bite you later.