Underwriting Challenges: Overcoming 4 Major Hurdles

July 14, 2023

As MPL insurers face headwinds, superior underwriting helps you stay the course.

Are you finding it challenging to underwrite MPL profitably? Well, you’re not alone. Brian Atchinson, the president and CEO of the MPL Association, recently spoke with AMBest regarding the persistent struggles of MPL writers. He noted that while the combined ratio is improving, more work remains to be done.

As I work closely with clients navigating this challenging market, I see how the convergence of multiple issues presents a significant hurdle to the profitable underwriting of MPL.

  • Rising claim severity and the impact of social inflation
  • Potential for indirect pandemic-related claims
  • Ongoing pressures of depressed demand in the physician segment
  • Diminishing reserve redundancies

At Preverity, we harness the power of over 80 billion rows of medical billing and prescription data. This wealth of information equips underwriters with the knowledge they need to make informed decisions. But we don’t stop there: We also connect billions of medical interactions with malpractice claims from our member companies.

In this post, I share my latest insights on how applying new data insights can enhance underwriting processes and improve results. I welcome a call to discuss unlocking better underwriting outcomes for your business.

MPL faces many of the same stresses as the US P/C industry.

MPL faces many of the same issues facing commercial underwriters. The aging and retirement of knowledgeable staff means underwriting experience is walking out the door. Automation is difficult and expensive. Loss and claims history and the actuarial science applied to them don’t capture escalating judgments and emerging risks. These longstanding issues are largely beyond insurers’ control and completely outside the underwriters’ purview.

In addition to challenges facing all commercial lines, MPL has to deal with extreme social inflation, worsening litigation outcomes and post-COVID uncertainty. In fact, MPL is one of only two commercial lines experiencing an upward trend in rate gains (the other being broker E&O).

Not surprisingly, COVID remains a factor, as the non-COVID-related death rate remains higher than expected. In addition to higher death rates, medical malpractice claims may increase due to COVID treatments, long COVID and the postponement of routine testing and treatment. Lastly, Atchinson pointed out that companies are trying to manage claims that, in some respects, have been on hiatus during the past couple of years with the pandemic.

The path to MPL profitability runs through underwriting.

Unlike their personal lines colleagues, commercial underwriters typically have limited loss data history that may not fully represent the past reality and certainly can’t predict future trends and exposures. For underwriters, historical data that’s not predictive can result in poor risk selection, ambiguous coverage language and inaccurate pricing.

Enhancing profitability requires that underwriting anticipate market uncertainties. Personal lines clarify that data and advanced analytics will be critical for commercial carriers to overcome the limited loss data history challenge, especially for emerging risks. McKinsey states that commercial P&C may need to partner with third parties to access predictive data, gain knowledge of new trends and update pricing models to incorporate evolving risks. The report discusses why commercial carriers are investing in advanced analytics, workbenches and external data sources to help put data at the fingertips of underwriters.

If it looks like a duck, swims like a duck, and quacks like a duck, it’s probably a duck.

Let’s begin with the challenge of accurately identifying and rating physicians. The duck analogy applies here: close observation tells us a lot about what doctors do on a daily basis and the related risks. With the right data, MPL underwriters can apply the right rate class to a doctor, practice or health system. Accurate rating, the underpinning of adequate pricing, is critical to profitability.

Let’s start by tackling the challenge of precisely identifying and rating physicians. Think of it like the duck analogy: closely observing doctors gives us valuable insights into their daily activities and associated risks. Analyzing daily activities captures more potential risk factors than specialty alone. With accurate data, MPL underwriters can assign the appropriate rate class to doctors, practices, or health systems. This accurate rating is crucial for ensuring profitable pricing.

MPL underwriters have traditionally relied on limited information such as physician specialty, malpractice history, and venue. However, Preverity goes further by delving into the analysis of daily procedures, board certifications, and hospital affiliations. This allows underwriters to identify provider practice patterns and assess the true risk involved. We have developed and pressure-tested models for each specialty, enabling us to rate all US providers automatically. These valuable data insights not only optimize underwriting activities in the present but also provide an easy-to-use dashboard for action in the future. By offering data-driven analytics and advanced technologies, MPL writers can attract underwriting talent seeking a smarter approach.

Apply 1+ million physician years of data to risk selection and rating.

In addition to accurate classification, connecting patient contacts with claims allows Preverity to analyze what leads to bad outcomes – associating specific providers with their daily activities. The data identifies which providers are doing risky things so that underwriters can match premiums to observed risks. These data show which physicians are responsible for a disproportionate number of risky procedures, including VBACs (vaginal birth after caesarian) and trauma treatment by orthopedic physicians.

Procedural data insights also provide visibility into the growing use of non-physician providers. Are mid-level providers acting within their remit, including physician assistants (PAs) and nurse practitioners (NPs)? Are they taking on more risk than traditional rates suggest? Diagnosis-related malpractice allegations, for example, are significantly higher for PAs (52.8%) and NPs (40.6%) than for physicians (31.9%). As mid-levels provide more patient care, it’s increasingly important to tease it out and rate it appropriately.

We typically find a 10% or greater mismatch in the risk class. We can help you quickly analyze every provider to ensure risk classes are matched appropriately, generating significant premium opportunities. Detailed clinical activity and analysis also provide accurate rating factors.

Interested? Let’s continue the conversation about underwriting.

Kind Regards,
Gene Boerger, President and Chief Operating Officer

615-982-7076 | info@preverity.com