Professional Liability Market: Key Insights and Trends to Look Out For

Living in today’s progressively contentious and risk-sensitive environment, professional liability insurance takes a quick shift from just being a product, to becoming a full-time necessity. All professionals, ranging from healthcare providers to tech consultants, are facing a range of legal threats. With the growing demand for protection, professional liability insurance responds with unwavering innovation, strategic bundling, and global expansion.

As per Allied Market Research, the global medical professional liability insurance (MPLI) market in its entirety is predicted to grow from $12.5 billion in 2021 to $33.7 billion by 2031 – corresponding to an exceptional CAGR of 10.8%. The reasons behind this are the massive increase in malpractice lawsuits, a greater level of awareness among patients and clients, and the use of AI-powered claims processing.

On the other hand, the entirety of the global liability insurance market is all set to strike $432.8 billion by 2031 – increasing from $252.3 billion in 2021. This reflects a steady growth at a CAGR of 5.7% – also impressive.

What’s Driving These Changes?

There are several key factors and trends that are constantly changing and, when viewed in concert, explain this transformation in detail. Some of these are:

AI Innovation & Automation

We all know about AI assessing professionals in their work; however, AI is also reshaping how insurers are reviewing and handling risks. How? Underwriting, predictive analytics, and AI-driven claims management are being used to boost efficiency. However, one thing that goes unnoticed is that the excessive use of AI is also bringing new exposures. Some of these include errors in AI algorithms, data breaches, and evolving cyber threats.

To address these issues, insurance companies are adjusting their professional liability coverage to include protection against these tech-related failures that may arise. This offers more specialized policies for professionals that use or develop technology.

Growing Regulatory Pressure

Expectations across all industries are strengthening due to tight restrictions by regulatory bodies, with healthcare, finance, and legal services being in the spotlight. As newer laws and reporting requirements are being introduced regularly, even minor non-compliance can lead to costly litigation. Because of this, professional liability insurance has come into play – and businesses are advised to reassess their coverage and ensure that it is keeping up with all the latest regulations.

Medical Professional Liability: A Fast-Evolving Segment

This is the one sector that is surging rapidly, proven by a forecast CAGR of 10.8% through 2031. The factors that contribute to this growth are various, such as:

• Malpractice claims are growing. Specifically, surgical errors are becoming the fastest growing category of claims.
• As more advanced medical equipment is relied upon, the stakes for liability increase.
• Self-representation cases are now easily covered by policies that include legal defense costs; this improves their appeal process.

When it comes to policy type, both occurrence-based policies and claims made policy forms are utilized widely. While there may be more utilization of one versus another depending on the type of profession or risk, the carriers available, and the state in which the policy is sold, each has its own benefits. Occurrence-based policy forms are sought after because they provide coverage for incidents during the policy period – no matter when the claims are made. This is relevant to professionals who may retire soon or change careers, and is a plus for providing more protection per policy period. Claims Made policy forms have the benefit of flexibility and portability in that you can move from one carrier to another more easily since most carriers offer a claims made based policy type. However, there are also some important additional differences between the two policy types that should be understood before purchasing either type.

Growing Trends in the Professional Liability Market

1. Bundled Coverage Options
SMEs and many business owners often need comprehensive coverage without the hassle of juggling through various policies. With this rising demand, most insurers are offering bundled coverage packages combining all essentials, such as professional liability, general liability, and Directors & Officers (D&O) coverage. Not only does this approach make policies more affordable, it largely streamlines protection.

2. Global Expansion
According to Allied Market Research, the Asia-Pacific region is leading the Medical Professional Liability Insurance market. This is further expected to grow at a CAGR of 14.1%. The cause? A booming healthcare market, increased litigation awareness, and workforce shortages increase the risk of errors and mistakes. Small firms and solopreneurs are eagerly purchasing E&O coverage, especially in tech-driven countries like Singapore, India, and South Korea.

3. Higher Coverage Limits Demanded
To ensure all risk needs are met, professionals are demanding higher coverage limits. The limits of $5 million to $20 million tiers are growing at a CAGR of 14.9%, reflecting the intensity of increasing claims and the requirement for better financial protection.

4. Tailored Coverage
The market is also now developing further with personalized and custom-built E&O options for several industries, including:

• Construction & Engineering (e.g., delayed projects)
• IT & Software Development (e.g., coding errors)
• Marketing & Media (e.g., Misrepresentation)

It is always advised to seek policies that are tailored to the specific risk exposures rather than entirely depending on generic coverage forms.

Rising Risks in Professional Liability

There are plenty of factors that influence the professional liability landscape, varying from social inflation to shifts in healthcare delivery and changes in the legal environment. These factors are creating a higher exposure for professionals across various industries, especially healthcare. Social inflation is fueling nuclear verdicts and massive settlements, which is directly contributing to the swift hike of medical expenses and defense costs. For instance, verdicts greater than $10M have more than doubled from the year 2015 to 2023. Furthermore, the average awards have risen from $23M to $40M, in the same period.

The legislative and judicial changes are also weakening tort reforms and creating more plaintiff-friendly laws in various states. These shifts include:

• Increased non-economic damage caps
• Expanded wrongful death actions
• Loosened “venue-shopping” rules
• Higher pre-judgment interest rates
• Increased exposure due to joint & several liability

These changes are further aggravating unpredictable courtrooms, where changing jury attitudes and demographics further add to the complexity of defending professionals in trial.

On the other hand, the healthcare industry is also seeing increased exposure due to shortage of staff, turnover, and scope of practice changes, along with the rise of new technologies. This makes the healthcare environment rather unstable, competitive, and political, and in turn leads to relentless financial pressures, growth of alternative site-of care, and an increased dependence on new technologies, which, ironically, adds further to liability risks.

The complexities of factors discussed above are creating more pressure on professional liability insurance markets, requiring professionals to adapt to new challenges and exposures which were once unanticipated.

Challenges Faced in the Market

Even though the growth is exceptional – challenges still persist. Some of these are:

• Industries that are more exposed to risks like healthcare, legal, and construction will continue to see high premiums, which is likely to limit access for smaller firms.
• Some professionals are confused about coverage options. It is assumed by many that general liability covers all risks, which is false. Professional liability is crucial.
• Many emerging markets remain underinsured, especially in regions where insurance isn’t legally mandated or culturally embedded. This leads to professionals being constantly exposed to risks.
• Some of the E&O policies do not extend to coverage of staff or actions taken by staff. This creates a threatening gap for small businesses.

Final Thoughts

Professional liability insurance has truly become a “must have” rather than a “nice to have”, especially for professionals and service providers. Even if a State does not make it a legal requirement, it behooves professionals to protect themselves and their livelihood. The market is evolving constantly, and it’s even more crucial for professionals to keep up with the pace. Whether you’re a consultant, service provider, medical prover, attorney, accountant, architect, engineer, entrepreneur/solopreneur, or a freelancer – the right insurance matters, and professional liability insurance is at the top of the list.

Meet the Author

Shayne Bevilacqua, MBA, TRA

Shayne Bevilacqua is the Principal and Owner of Professional Liability Insurance Group (PLIG) and of Bevilacqua Insurance Group (BIG). He purchased PLIG in 2007, after it was founded in 1997 to cater to physician clients during the Medical Malpractice insurance crisis. Recognizing the importance of diversification, Bevilacqua initially expanded the agency’s services to include other professionals such as lawyers, accountants, architects, and engineers, and created a second independent agency, BIG, adding additional services for clients. Over the years, the agencies have secured access to a wide range of A-rated insurance carriers, allowing them to offer comprehensive insurance policies for businesses of all types.

Bevilacqua’s background is diverse, with experience in the healthcare industry, scientific research, and marketing. Prior to becoming a business owner, he spent over 20 years in the healthcare industry, including roles in orthopedics, research science, sales training, and marketing. This experience has allowed him to leverage his healthcare and corporate business knowledge to grow and diversify the agency.

In addition to his professional accomplishments, Bevilacqua is actively involved in his community. He has served as a major supporter and Board Member of three local non-profit organizations, including the Big Brothers and Big Sisters of Cumberland & Salem Counties, and the Cumberland Cape Atlantic YMCA in Vineland, and the Greater Chamber of Commerce of Vineland. He is also a member of PLUS (The Professional Liability Underwriting Society).

Bevilacqua holds an undergraduate degree in Business from St. Joseph’s University, a Master’s in Business Administration from Rowan University, and is a Certified Trusted Risk Advisor (TRA). Originally from Philadelphia, he currently resides in New Jersey with his wife, Katherine, and their children. In his free time, Bevilacqua enjoys staying active through activities such as participating in OCR (Obstacle Course Races) with his wife and traveling with his family.

The Professional Liability Insurance Group and Bevilacqua Insurance Group are licensed in Arizona, Delaware, New Jersey and Pennsylvania. Bevilacqua is personally licensed in 11 states across the US.