September 11, 2026 by matray

Rising claim severity is driving tougher underwriting, higher prices and increased pressure on healthcare organizations to retain more risk, according to Gallagher’s “Healthcare Market Report: Summer 2026.”

Although medical liability claim frequency has generally stabilized or declined, the cost of individual claims continues to increase, reshaping the market for hospitals, health systems and physician organizations, the report said.

Nationally, the average paid physician medical professional liability claim now exceeds $470,000, nearly double the average recorded in the early 2000s. Average claims frequently exceed $650,000 in higher-severity states, including Illinois, New York, Iowa and Georgia.

Verdicts exceeding $10 million also have returned to pre-pandemic levels following the reopening of courts, with no sustained moderation in jury behavior since the COVID-19 pandemic, Gallagher said.

The report attributed the trend to social inflation, increasingly aggressive plaintiffs’ attorneys and the expansion of third-party litigation financing, which can support longer and more expensive litigation. Legislative changes, evolving judicial interpretations and plaintiff-friendly venues also have made it more difficult for insurers to predict and price future losses.

Hospital professional liability insurers are responding by reducing available limits, raising attachment points, increasing prices and exercising tighter control over aggregate exposures, according to the report. Healthcare systems also face pressure to accept higher deductibles and self-insured retentions, particularly when they operate in difficult venues, have unfavorable loss histories or are experiencing substantial exposure growth.

Some insurers have adopted minimum underwriting thresholds intended to prioritize long-term profitability over premium growth, leading them to contract their books of business.

Gallagher said birth injuries and other obstetrics-related claims remain the largest individual drivers of hospital professional liability losses. The growing complexity of medical care and rising patient acuity also increase the likelihood that adverse events will result in permanent impairment or death.

Sexual misconduct and abuse allegations have become another significant source of loss because they can produce uncapped damages and reputational harm, the report said. Broader interpretations of noneconomic damages and the invalidation or increase of statutory damage caps in some states also are pushing claim values higher.

The physician medical liability market remains generally stable but cautious. Rate increases imposed since 2017, favorable reserve development and stronger investment income have modestly improved insurers’ financial positions, despite the industry’s inconsistent underwriting profitability over the past decade.

Capacity remains available for well-managed physician organizations, although underwriting is selective and some carriers continue to seek rate increases or structural changes in high-risk jurisdictions, Gallagher said. The report advised healthcare organizations to begin renewals early, carefully assess limits and retentions, maintain strong risk-management programs and adopt proactive defense strategies.

Market conditions could stabilize over the next several years, but Gallagher said that outlook depends largely on whether the growth in claim severity begins to moderate.