As a medical malpractice insurance broker, I’m committed to helping physicians secure the most comprehensive coverage at the best possible price. In this article, we’ll explain the reasons behind the anticipated rate hikes in 2025 and outline the most effective strategies doctors can use to manage and minimize rising costs.
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Are Malpractice Insurance Premiums Going up in 2025?
Over the last decade, malpractice insurance premiums have steadily increased, with no signs of slowing down in 2025. While we don’t know if it’ll reach the insurance hard market of the early 2000s, the current financial burden of malpractice premiums significantly affects physicians, directly shaping their decision-making processes and impacting healthcare quality nationwide.
What Influences the Premiums You Pay?
There are a variety of factors that play into higher malpractice insurance premiums for physicians and surgeons.
- Your Risk Level
Some specialties, particularly those in surgery and emergency medicine, have much higher risk levels. General surgeons, orthopedic surgeons, OB/GYNs, plastic surgeons, and otolaryngologists rank among the top medical specialists most prone to lawsuits and thus often face higher premium costs. Given the escalating legal defense expenses and substantial verdicts in recent times, increased carrier payouts are leading to higher rate increases.
- The Coverage Types & Their Limits
As the risks physicians and surgeons face become more expensive to insure, premium costs increase for both occurrence and claims-made coverage across the board.Physicians and surgeons can choose between two types of coverage: Occurrence Coverage and Claims-Made Coverage.
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- Occurrence Coverage is favored because it doesn’t require tail coverage in the future. It offers straightforward and long-lasting protection for medical professionals by covering incidents that occur during the policy period, regardless of when the claim is filed. Furthermore, the cost of occurrence coverage remains relatively level over the years.
Depending on the risk profile, occurrence coverage might not be available. Although the cost for occurrence form coverage is more expensive initially, there is no future tail cost to worry about, as tail coverage is not necessary with occurrence.
- Claims-Made Coverage, the most common form of malpractice insurance, covers claims made and reported during the policy period. It typically starts with lower premiums than occurrence coverage but increases annually for the first five years, reflecting the increasing risk of claims being made over time.
Additionally, tail coverage adds an extra cost (usually another 200-300% of the expiring annual premium in most cases) when coverage needs to change due to new jobs, retirement, cancellation, or non-renewal of coverage, etc.
- Higher coverage limits, or the maximum amount the insurance company will cover per claim and year, also increase insurance premiums. Some states mandate a higher minimum coverage limit, which can increase premiums statewide. Physicians in higher-risk specialties also have to carry higher coverage limits and thus pay higher premiums.
- Occurrence Coverage is favored because it doesn’t require tail coverage in the future. It offers straightforward and long-lasting protection for medical professionals by covering incidents that occur during the policy period, regardless of when the claim is filed. Furthermore, the cost of occurrence coverage remains relatively level over the years.
- Your Claims & Practice History
Many factors impact the premiums you pay, including:- The number of suits you’ve had and their outcomes
- Length and type of practice
- Any additional steps you’ve taken to enhance patient safety and reduce risk, such as completing risk management education programs
Broker tip: Some insurers offer discounts for participation in Risk Management programs.
- Your Location
While premiums are rising nationally, they are not increasing simultaneously across states. State tort reform and aggregate claims data both impact insurers’ prices. In 2024, Hawaii, Pennsylvania, Montana, Oklahoma, and Nebraska saw the highest premium increases of 10% or more. Conversely, California saw premiums decrease, likely due to tort reform and pushback from private organizations. - Insurance Provider
Always choose insurers with an AM Best “A” or higher rating. An A-rating indicates financial strength, long-term solvency, and an established history of being able to defend physicians during costly malpractice claims. The risk of these companies going under is significantly lower, which lowers the risk for physicians and surgeons insuring through them.
Trends Indicate Rising Premiums for 2025
Medical liability premiums have been rising consistently for the past decade and show no signs of slowing in 2025. Allen Hardiman, PhD, American Medical Association’s senior economist, states that “the increase in premiums has become more widespread, something that hasn’t happened since the last hard market in the early 2000s.”
Hardiman’s recent report shows that 46 of the 50 states (and Washington, D.C.) have reported increased premiums, up from 36 states in 2023.
Factors driving these hikes include:
- Claim volume
- Claims resulting in larger payouts
- Escalating legal fees
- Economic inflation
1. Increase in “Nuclear Verdicts”
“Nuclear verdicts,” or those with high-dollar payouts, are rising nationwide. As reported by MedScape, Richard Henderson, senior vice president for TransRe, an international reinsurance company, said, “2023 blew away every record previously set among high medical malpractice verdicts.” These high payout verdicts are increasing nationwide, even in states that rarely saw them in previous years, and cause premiums to go up across the board.
2. Rising Cost of Legal Fees
Malpractice insurance carriers typically retain and pay the expenses of legal representation for physicians or policyholders involved in lawsuits.
Legal defense expenditures are considerable for malpractice lawsuits, ranging from $50,000 to $100,000 on average, with even higher fees, sometimes up to 40%, for prolonged and intricate cases. Although some states have capped the fees lawyers can receive with tort reform efforts, there are a host of other payouts that carriers must endure, including:
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- Expert witness fees
- Attorney travel expenses
- Copying costs
- Court filing costs
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This financial burden on insurance carriers is a fundamental factor contributing to premium hikes.
3. Economic Inflation
The overall condition of the U.S. economy profoundly affects malpractice litigation costs, leading to notable impacts on insurance premiums. Capital Economics estimates the inflation rate will peak around 4% by the end of 2025, double the Fed’s long-term target.
When inflation increases, the resulting surge in essential living expenses, including food, electricity, and fuel, prompts defendants in malpractice cases to pursue higher financial compensation for their clients. Consequently, malpractice insurance carriers face increased payouts in cases where policyholders are unsuccessful and raise their premiums accordingly.
4. Major Weather Events
Major weather events such as wildfires, hurricanes, and tornadoes are becoming more frequent, and insurance companies are increasing premiums nationwide, even in states less frequently impacted by them. As weather risks increase, reinsurance (insurance for insurance companies) companies raise premiums across all sectors, including medical malpractice.
The number of significant weather events in your state doesn’t necessarily indicate how much premiums will increase. California has seen a decrease in premiums despite the extreme wildfire risk. On the other hand, Nebraska has seen a significant increase in premiums despite being less vulnerable to major weather events than other states.
So, while many states are passing tort reform to address these rising malpractice premiums, physicians and surgeons nationwide should prepare for the impact of weather on insurance premiums.
Top 5 States With Medical Malpractice Premium Increase
| State | Percent of Premiums Increase by More than 10% | Contributing Factors |
|---|---|---|
| Hawaii | 50% | There is an increase in the number of incidents and the payout amounts during malpractice cases. |
| Pennsylvania | 49% | Severe weather events and recent tort reform laws. |
| Montana | 33.3% | Rise in legal fees and increase in medical malpractice damage caps. |
| Oklahoma | 33.3% | Increase in high payout verdicts and removal of damage cap. |
| Nebraska | 33.3% | Inflation, rising legal fees, and an increase in payout rates. |
Source: AMA
What Does This Mean for the Future Costs of Medical Malpractice Insurance?
Malpractice insurance carriers often raise premiums annually to preserve the financial stability of their insurance pools, factoring in risks like claims trends and legal costs. While rate increases are never welcome, they are far better than the alternative: carrier insolvency. When companies like Capson, Galen, and Oceanus collapsed, many physicians were left without proper protection, a risk no doctor can afford to take.
Increasing premiums is a standard strategy carriers use to safeguard against unforeseen losses and ensure ongoing coverage for all policyholders.
While some rate increases are inevitable, preventing medical malpractice lawsuits remains one of the most effective ways for physicians to minimize significant premium hikes.
How Can Physicians & Surgeons Mitigate Rising Malpractice Insurance Premiums?
Reducing malpractice risk can reduce the number of malpractice suits, in turn reducing malpractice insurance costs.
Top 3 Tips For Doctors & Surgeons to Avoid Medical Malpractice Lawsuits
Here are three ways you can reduce your risk of malpractice suits and potentially keep escalating premium renewal costs in check:
1. Transparency & Consistent Documentation
Take proactive steps to improve communication with patients. Keep precise records of all patient appointments, calls, and conversations throughout treatment and post-care. Medical records are among the first documents a malpractice attorney reviews, and they can either forestall a suit or contribute to an aggressive malpractice claim.
2. Get it in Writing & Informed Consent
Ensure your patients fully understand any possible surgical procedure complications and give informed consent.
3. Stay Current & Strive for Excellence… Always
Raise the level of surgical excellence in your practice with board-certified physicians with fellowship-trained skills and experience in their specialty. Then, partner with a trusted medical malpractice broker familiar with your specialty who can match you with the right coverage from an AM Best “A” rated carrier.
Take the Next Step
Save an average of 28% on group medical malpractice insurance with MEDPLI. Our medical malpractice insurance brokers can help you find the right coverage from top carriers at the best rates. Call us at 1-800-969-1339 to protect your practice or email us at info@medpli.com
