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Playing catch-up or leapfrog?

Insurers will have to adopt a more holistic approach to digital health industry risks if they are to bridge any gaps in coverage exposed by the changing medical and life sciences landscape

Senior Man consulting with his doctor online
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The insurance industry has often been left playing catch-up with advancements in the medical sector. In 2006, when Beazley started underwriting its miscellaneous medical risk book of business for operators of blood and human tissue banks, there was no real market because these risks fell somewhere between medical professional and medical product liability. It took some time to learn how to shape the coverage to fit the risk by combining and customising existing products.

Three years later, in 2009, we wrote our first telehealth risk and since then the digital health sector has continued to evolve in line with technological advancements and changing attitudes towards remote care among patients, as well as health practitioners, governments and investors.

However, 2020 was the year that this sector really came of age. Covid-19 saw a surge in growth of the miscellaneous medical portfolio, as the pandemic forced the healthcare and wellness sectors to turn to technology and remote service provision. This included the exponential rise in the use of telehealth to gain access to care at a time when the pandemic severely restricted patients’ ability to see their doctors.

As new modes of care came to dominate, the US experienced a 50-175 times increase in the number of telehealth visits and in the UK only one in 10 patients saw a doctor face to face. Visits to Singapore’s MyDoc digital health platform rose more than 160% in the first quarter of 2020 alone.

But as health professionals pivoted to these new ways of working, so Beazley saw the nature of the risk changing.

For example, telehealth clients, for whom the bulk of the risk was typically covered under a product liability policy form, dramatically expanded their online presence almost overnight. As the move to remote consultations accelerated, so did pressure on organisations to provide appropriate training, increasing the potential for over-reliance on virtual advice and increasing the exposure to professional indemnity risks.

As remote care expanded, so the need to enroll more qualified practitioners increased, and appropriate credentialling of health professionals began to look like another area of potential risk exposure, as providers considered the challenges inherent in providing services for a higher volume of patients, some across borders.

Laboratory risk is well established, and was a standard cover, but the shift to manufacturing and distribution of testing kits for use in drive-through centres or at home also created brand new liabilities. Furthermore, as disease testing and monitoring via track and trace or similar systems became widespread, it risked attracting the attention of cyber criminals, putting stress on service providers’ data privacy policies and technology product liability policies.

New risk challenges

Beazley has had to think hard about how best to insure and mitigate the exposures represented by these risks, in part, because they are new risks, but also because the risks in our existing book of business have also changed over the last year.

For example, many dialysis clinics in the US became centres for vaccination. So, a risk that we have written for 10 years as a dialysis clinic, is now storing and injecting vaccines into patients. This change of focus also involves clinics hiring and vetting new staff with the relevant expertise, creating a range of new exposures.

Developments like these challenge insurers to think hard about the nature and the quality of the traditional and new risks they are underwriting, but they have also put digital health leaders’ risk management strategies under the microscope.

In our experience, very few digital health businesses have a 360° view of the new and unique web of interconnected exposures that the rapid transition to remote care has set in train. The sheer variety of organisations within this fast-moving sector also adds substantially to the complexity for their insurance partners.

Healthcare and lifestyle professionals are well-versed in medical malpractice, bodily injury and professional liability exposures, as are their specialist brokers. However, many are unaware of the risks that arise when they move their business online, such as data privacy and protection, cyber risk, technology product liability and media liability risks.

Technology businesses leaders by contrast typically understand cyber risk, data breach liabilities and product liability, but may not be aware of the bodily injury, medical malpractice, or the professional liability risks they may face if the technology fails or malfunctions, and this may also be a ‘gap’ for their broker partners.

Against this backdrop, we are already seeing a mix of claims relating to cyber, product liability and medical malpractice (med mal) arising from the expanded take-up of digital health and wellness services.

Bridging the coverage gap

With the consequences of the pandemic set to remain with us for years to come, governments around the world will need to respond and adjust healthcare delivery accordingly. The key challenges for the insurance industry are clear.

We have to take a more holistic and future-focused view of the risks the digital health industry faces to ensure that there are no gaps in cover.

This means that we anticipate a move away from typical standalone cyber/med mal policies, or product liability policies, which may not cover bodily injury claims, towards more seamless cover. This will ensure there is protection for bodily injury caused by product failures as well as medical malpractice and cyber cover, with no duplication or gaps.

We will also need to focus on developing products that address local requirements and comply with local regulations.

In the US in 2020, for example, several states relaxed regulations surrounding the types of providers that may be reimbursed and services that are covered. Distant and out-of-state originating sites were also temporarily permitted as part of the initial pandemic response.

However, such relaxations will not be extended forever and as US states look to improve access to care, for example, they are also seeking to incentivise greater provider accountability for outcomes.

As yet we are not seeing the claims outcome of the pandemic on the digital health sector. Many courts remain closed or are operating on a reduced basis and a deep stock of goodwill towards the medical profession in light of its response to COVID-19 may have delayed potential claims.

Claims aside, however, there is no doubt this is one of the most exciting and challenging sectors for our industry and one which tests our ability to innovate and communicate our new offerings to the limit.

As we look ahead, we will also need to focus on the training and the education of our underwriters and brokers to ensure that they understand the risk, how to access it and how best to underwrite it in order that we can catch up with, or maybe leapfrog the demands of our digital health clients.