Nearly all countries of the US, Canada and European Union require that the medical professionals are effectively covered under a medical malpractice insurance. The medical professionals usually buy their medical malpractice insurance from a commercial company. Hospitals purchase their own medical malpractice insurance policy that covers both the hospital and its medical staff. Medical professionals employed by the federal govern¬ments usually do not buy medical malpractice insurance; in case any legal suit is filed then the suit is brought against the federal government, which insures itself.

Premiums for medical malpractice insurance vary with the insurer’s extent of risk coverage. Insurers set their premiums based on the facts like their expected payouts in a particular risk group; the degree of uncertainty encapsulat¬ing this estimate; the expected administrative expenses and future investment income of the insurer and the rate of profit sought by the insurers. Medical malpractice insurance does not work like auto insurance, like when a motorist has a claim, his insurance premiums go up. Medical mal¬practice insurance premiums are usually priced according to the medical professional’s specialty and geographic location only. For hospitals, some degree of experience rating occurs. Hospital premiums also vary with hospital location and the clinical ser¬vices offered by them.

It takes four to five years to decide a claim from the date of an incident. This long period of time gives the insurers a lot of uncertainty about what their liability ultimately will be. The difficulty of estimating liability for claims makes it hard for insurers to set premiums accurately. Recently federal legislative issued a notification that most kinds of medical malpractice insurance would be regulated primarily by the states. State insurance commissioners regulate rates to ensure that they are not excessive, inadequate or unfairly discriminatory. Regulation could keep the prices of the medial malpractice insurance higher or lower. Prices could be higher if regulators set price in an effort to protect consumers against companies becoming insolvent or they could be lower if regulators refused to approve rate hikes.

Several shifts in the medical malpractice insurance market have affected how much medical professionals should pay for insurance and the amount of exposure they face. Reinsurance covers losses above a specified threshold which helps the organizations to limit their exposure in a given year. Reinsurance has become more expensive during the most recent medical malpractice crisis. When reinsurance costs more, insurers’ profits decline unless they pass along the increase to those they insure. Recently, instead of opting for commercial insurance, many hospitals are forming groups in order to exert greater control over rates and leave a risk pool that includes higher-risk facilities.

There is a remarkable shift from occurrence policies, which cover all incidents in the policy year regardless of when the claim is filed, to claims-made policies, which cover only claims filed in the policy year. By associating more closely with hospitals, some medical professionals are able to find a stable, relatively low-cost source of medical malpractice insurance. This trend has widened the disparities between physicians who practice in large-group settings and those in small-group or solo practice settings, who are more vulnerable to fluctuations in overhead costs. However the medical malpractice insurance business market is changing fast and it yet to reach towards its final shape.