Professional liability is a growing and vibrant industry that plays a significant role in the world economic system. As the business world changes to an information-based and service-oriented economy sustained by monetary markets, fresh and very complex liability risks crop up. Individuals and companies depend on systems of information and professional services and as soon as problems arise, claims for damages and legal actions usually follow. The insurance industry and methods of risk management are swiftly changing to address these challenges and to sustain business activities (Domino, 2009, p. 44; Baranoff, 2003, p. 3).
Professional liability is an exceptional division of commercial-based insurance with certain features that distinguish it from other insurance coverage. Professional liability insurance has three fundamental areas namely Medical Professional Liability Insurance, Non-Medical Professional Liability Insurance, and Managerial Liability Insurance. Medical Professional Liability Insurance covers institutional and individual health care providers. Non-medical professional liability encompasses numerous professions with considerable risk exposure such as engineers, financial experts, bankers, and lawyers among others. The main managerial liability insurance includes Directors and Officers coverage (D&O) and Employment Practices Liability Insurance (EPLI) (Rejda, 2001, p.35; Morris, 2000, p. 2).
The risk to an expert’s reputation and related issues normally leads to numerous policy requirements involving legal defense. Claim-made triggers are frequently used because of the blurry and enduring nature of occurrences that leads to claims. Loss control services are adjusted to specific activities and exposure of those insured. Professionals normally prefer to work with insurance and personnel who are well acquainted with/her profession and have soaring optimism with regard to the quality of service. Professional liability insurers often use several distribution channels such as brokers, agents, and wholesalers among others. In addition, affinity marketing through experts and trade organizations is very important in professional liability insurance (Crane, 2001, p. 132).
The rationale for Professional Liability Insurance
The change of economies to information-based and service-oriented industries has a significant impact on the insurance sector. The conventional property risks are being replaced by a form of risks created by dependence on information systems and technologies. Failures of these systems from numerous causes such as poor security measures often have catastrophic results for businesses and their clients. This increases the probability of complaints against the companies and professionals who design, install and maintain these systems. Intellectual property rights are also growing in the legal arena as the information itself is becoming a precious commodity. Insurance companies are acquiring experience with these new risks; however, the rapid advancement of technology and the law surrounding it proves to be a major challenge in underwriting, designing policies, and adjusting claims (Peterson, 2007, p. 14-15).
The hasty growth of the service economy and the emergence of new professions increase the demand for professional liability coverage for these professions. The responsibility and risk exposure of the long-established professions such as law, accounting, and medicine are also evolving. In addition, an increase in specialization from these professions demands more customized insurance products. Insurance companies are gaining more experience with risk exposures from specialized professions. In addition, companies and professionals are improving their risk management activities in different ways further from purchasing insurance coverage (Grabowski, 2000, p. 78).
Changes in medical economics also call for special attention in relation to their impact on the medical insurance cover. Advancement in medical technology has had incredible results in terms of treating complex conditions and prolonging and enhancing the quality of life. Simultaneously, these advancements, along with other aspects, have massively added to medical cost pressure and increased consumer expectations for successful results. On the other hand, these factors have increased the liability of risk exposure of the experts. Furthermore, institutional features of reputable professions, for example, law and medicine, are transforming in a different way with risk management implications (Peterson, 2007, p. 17).
Medical Professional liability insurance in the U.S
Medical professional liability insurance for a long time has been known as medical malpractice insurance; it represents a significant part of the professional liability insurance industry. Most of the data is available on this division since U.S statutory accounting legislation demands that insurance companies individually report premiums, losses, and expenses of different types of insurance covers. In addition, Medical professional liability insurance data are fragmented into incident and claim made policies. The breakdown of these data was prompted by the accessibility and affordability challenges of the 80s. These problems quickly ended, but the data requirements stay put as a regulatory mechanism and were also useful for research and following market trends (Peterson, 2007, p. 14-15).
Medical professional liability insurance is classified into four categories namely physicians professional liability insurance, hospital professional liability insurance, allied healthcare professional liability insurance, and managed care organization professional insurance. The first three categories are aimed at protecting individuals and medical institutions. Managed care organizations are new in the field of medicine and were introduced to deal with the increasing cost of health care. They include health maintenance organizations, point of service plans, and provider service organizations among others (Domino, 2009, p. 44).
Despite the current debt crisis in the U.S, the relegation of U.S credit, and the deteriorating global economy, the professional liability industry in the U.S has remained very stable. A recent study was conducted by a committee on professional liability in the U.S. to assess the trend in medical professional liability insurance for anesthesiologists. The study sampled thirty-four medical liability insurance companies in the U.S. The information obtained related to policy limits, premium costs, and the trend in liability insurance coverage in the U.S (Domino, 2009, p. 46).
The study established that most medical practitioners (about 80%) had standardized policy limits of one million dollars per occurrence and three million dollars per year. However, the study established a broad range of policy limits among the liability insurance companies and that medical practitioners purchase higher and lower policy limits than most known policies. The choice of the policy limits in the U.S depends on the employer, medical institution or statutory requirements, locality of practice, individual choice, and asset protection. About 20% of the sample had higher policy limits ranging from $2 million to $10million, with higher policy limits most preferred in states like Alabama, Washington, and Georgia. Lower policy limits were being bought in states with soaring costs of liability insurance or those with supplemental surplus coverage liability or funds for patient compensation, for instance, the state of Pennsylvania (Peterson, 2007, p. 14-15).
However, currently premium for mature policy limits for medical professional liability insurance in the U.S is almost the same in most states. The average premium in the year 2010 is about $ 20000 and this ranges from $ 3245 to 54000. In the past, there were noticeable differences in the rates of premium among states based on the same criteria as policy limits. Sates that had higher average premium amounts ($30000 and above) include Florida and Illinois. Those which had lower average premium amounts were mainly rural regions of Minnesota, Nebraska, Wisconsin, and South Dakota (Domino, 2009, p. 46).
The cost for medical professional Liability Insurance currently has relatively stabilized than in the past. There was an escalation in the cost of insurance between 2003 and 2006 and this is attributed to the merging of the insurance industry, decrease in the investment income, the rising cost of war, and volatile legal awards. The current stability is attributed to a decline in lawsuits, insurance reforms, and improvement in patient safety. However, it is not clear how the current economic crisis, credit anguish, and feasible double-dip recession will affect the future premiums (Peterson, 2007, p. 19).
Over the recent years, premiums for medical practitioners carrying out highly risky operations have been higher than those performing less risky operations. This trend differs among states in the U.S. Most professional liability insurance companies are currently demanding pain physicians have comradeship training and have their board certification. The number of these companies offer reduced rates for those who have been certified (Domino, 2009, p. 46).
Medical professional liability insurance in UAE
The United Arab Emirates has increased focus on the reforms and regulation of the health sector. The most recent reforms touched on the local health authorities such as Health Authority Abu Dhabi and Dubai Health Authority. The reforms emphasized the incidence of claims made against health workers and by inference their professional liability insurers. The local health authorities have come up with a mechanism for assessing, if appropriate, the discipline of licensed health workers. The standards to be observed by the health practitioners are well articulated in the Medical Liability Law of 2008. Even though the local authorities do not have the power to award damages for failure by medical practitioners to abide by the set standards, a disciplinary inquest normally prompts negligence claim in the court of law, and a resulting claim on the medical practitioner professional indemnity policy (Jones & Thornton, 2011, p. 1).
The United Arab Emirates has a civil law structure under which all laws are methodically arranged in codes. Pursuant to the country’s constitution, all the coded laws are subjected to Islamic Shariah law, which the constitution recognizes as the principal source of legislation and to which all the judiciary refers when interpreting the coded laws. Generally, the most imperative laws of application to medical liability law are the country’s civil code and criminal code which have significant provisions pertinent to claims for medical malpractice (Jones & Thornton, 2011, p. 2).
Conclusion
Professional liability is an exceptional division of commercial-based insurance that is meant to cater to the faster growth of the service economy and the emergence of new professions. Professional liability insurance encompasses Medical Professional Liability Insurance, Non-Medical Professional Liability Insurance, and Managerial Liability Insurance. Medical professional liability insurance is classified into four categories namely physicians professional liability insurance, hospital professional liability insurance, allied healthcare professional liability insurance, and managed care organization professional insurance. The medical professional insurance industry in the U.S has remained stable despite the numerous economic challenges being experienced locally and globally. This is attributed to a decline in lawsuits, insurance reforms, and improvement in patient safety. In UAE, the standards to be observed by the health practitioners are well articulated in the Medical Liability Law of 2008. In general, most crucial laws of application to medical liability law are the country’s civil code and criminal code which have significant provisions significant to claims for medical malpractice.
References
Baranoff, E. (2003). Risk Management and Insurance. New Jersey: John Wiley & Sons.
Crane, M. (2001). A New Malpractice Crisis? Why Premiums are Soaring Again. Medical Economics, 13, 132.
Domino, K.B. (2009). Professional liability insurance premiums for anesthesiologists: stability despite the economic crisis. ASA Newsletter, 73(8), 44-45.
Grabowski, M. (2000). So, What Is a Professional Service Anyway? The John Liner Review, 14/2: 77-84.
Jones, W., & Thornton, A. (2011). UAE Medical Malpractice Insurance Development. Abu Dhabi: Cyde & Co. Web.
Morris, B. A. (2000). Professional Liability: Erupting e-Commerce Exposures, Insurance Advocate.
Rejda, G. E. (2001). Principles of Risk Management and Insurance. 11th Edition. Boston: Addison-Wesley.
Peterson, G.N. (2007). Malpractice insurance: what are the limits? ASA Newsletter, 71(8), 14-15.
Appendices
Appendix 1: Professional liability divisions and sub-divisions
