Niche provides healthy loss ratio

Niche provides healthy loss ratio

Health care facilities and services provide $6.6 billion in premium

This month we continue our look at the health care field that we started in last month’s issue. In this issue we look at health care facilities and services performed outside a medical professional’s office. This includes home health care services, hospitals, nursing and personal care facilities and medical and dental labs. This niche provides $6.6 billion in commercial lines premium, or 5% of the total commercial lines premiums written, according to data compiled by IMR (Insurance Market Research) Corp., one of the PLP Companies. The countrywide loss ratio is a healthy 52.0%, making this an attractive market.

There are more than 74,000 establishments in this category employing more than 7.9 million people in the United States. Not surprisingly, this high level of employment makes workers compensation the largest line in this niche, representing 40.7% of the total commercial lines premiums. General liability is next, with 33.3%; followed by medical malpractice (21.0%); commercial property (3.2%); boiler and machinery (1.6%) and commercial auto (0.3%).

Hospitals represent the largest subcategory in this niche, representing $3.8 billion in premium and a loss ratio of 45.8% in the United States. Nursing and personal care facilities are next, with $1.71 billion in premium and a 61.6% loss ratio. Home health care services represent the third largest subgroup, accounting for $645.7 million in premium and a 55.8% loss ratio.

“This segment of the health care market is less critical for independent agents, since much of the business is in large and jumbo accounts, normally the purview of the large brokerage firms,” Lindsay Smith, president of IMR points out. “However, there still is a significant amount of premium in the small and medium-sized accounts. A total of $1.25 billion in premium resides in these accounts and the majority of the businesses-nearly 60,000-employ fewer than 100 people.” More than 40,160 of these facilities and services are small businesses (those employing fewer than 20 people), providing $229.7 million in premium for an average of $5,720 per account. There are 19,000 medium-sized businesses (20-99 employees) accounting for $1.02 billion in premium for an average of $53,690 per account. The 11,936 large accounts (100-499 employees) provide $2.0 billion in premium for a $167,370 average premium per account, and the 3,050 jumbo businesses (those employing 500 or more employees) account for $3.34 billion for an average of $1.09 million per account.

Health care facilities and services provide $1.26 billion in premium in the Rough Notes Midwest region. The loss ratio is 50.7%. The largest subgroup in this category is hospitals which accounts for $686.2 million and a loss ratio of 44.0%. Nursing and personal care facilities are next, providing $408.0 million in premium with a loss ratio of 60.5%. Home health care services are third, accounting for $94.1 million with a loss ratio of 53.6%. There are 13,900 health care facilities and services in the region, employing 1.56 million people. There are 7,125 small (1-19 employees) businesses in the Midwest, providing $43.2 million in premium for an average of just over $6,000 per account. The 3,620 medium-sized firms (20-99 employees) account for $208.1 million for an average of $57,500. The 2,600 large accounts (100-499 employees) provide $424.1 million in premium for an average of $162,660, and the 541 jumbo accounts (over 500 employees) provide $579.8 million in premium for an average of $1.07 million per account.

Information on this niche market is available from IMR at 39 E. Hanover Ave., Morris Plains, NJ 07950, or call (201) 898-4706.

Copyright Rough Notes Co., Inc. Jun 1997

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