The medical device industry is an expanding market with significant growth forecasted over the next decade. According to KPMG data, global predictions reveal the life sciences sector will grow by more than 5% per year, reaching nearly $800 billion by 2030.
Tech innovations (including artificial intelligence), an aging U.S. population, increased healthcare spending and an improving economy have fueled the industry's rise.
As this market evolves, medical device manufacturers face ever-changing risks. It is critical for these manufacturers to understand these unique risks and have plans in place to help mitigate them. This presents a significant opportunity for independent insurance agents to serve as valued advisors for their life sciences clients.
Medical device manufacturers face a variety of risks and often are not fully aware of how they may be exposed. Insurance protection can be a complex area for such organizations with high-risk implications.
Insurance programs built to address common risks can help protect these clients. As agents look to help protect their medical device manufacturer clients, there are five common risk areas to consider: contractor liability, human clinical trials malpractice allegations, end-user training liability, errors in human diagnostic testing, and product defects.
Five Common Risks
Contractor Liability. A contractor hired to conduct training on a medical device may have allegations brought against him or her for providing inadequate training, which can present a vicarious liability to the organization. Ensuring organizations have coverage for medical malpractice, including vicarious liability risks, can offer important protection.
Human Clinical Trials Malpractice Allegation. Pharmaceutical or device manufacturers developing products used in human clinical trials can face allegations of clinical trial malpractice. This can also include risks stemming from the product itself. The right medical professional and product liability coverages are critical, especially for clinicians providing patient care, administering the trial product, and reviewing subject data to determine product effectiveness.
End-User Training Liability. Manufacturers with an FDA-approved product may have clinicians, either on their payrolls or contracted, who provide product end-user training to either clinicians or direct to consumers. In either case, the direction and advice provided by the clinicians can open the organization up to product liability and professional liability exposures.
Errors in Human Diagnostic Testing. In vitro diagnostic device manufacturers with an FDA-approved product or a laboratory-developed test, which includes in-house human diagnostics, likely will have pathologists on their payrolls who run these tests. These pathologists could make a mistake, or the test could fail to function as designed, causing harm to the consumer. These tests follow the Clinical Laboratory Improvement Amendments (CLIA). CLIA requires clinical laboratories to be certificated by their state as well as the Center for Medicare and Medicaid Services (CMS) before they can accept human samples for diagnostic testing.
Medical device manufacturers face a variety of risks and often are not fully aware of how they may be exposed.
Product Defects in Custom Devices and Fillers. Manufacturers of orthotic or prosthetic devices that also provide a custom device or device fittings can experience defects. An orthodontist or prosthetist practitioner will perform detailed assessments to determine a patient's orthotic and prosthetic needs and functional status. Certified technicians help orthotic practitioners with patient management as well as with fabrication, fit and maintenance of orthotic and prosthetic devices. An assessment, fabrication, fitting or device maintenance error could result in harm to a patient.
The Role of Independent Agents
Understanding the clients' processes, business models and customers can help better identify their risk areas and build coverage plans that work with their organizations. Identifying whether a risk is covered under product liability or medical professional liability (or medical malpractice liability) helps agents identify possible gaps in coverage. There have been situations where an organization is missing a key medical professional liability coverage, thinking it was covered under their products liability coverage or errors and omissions, unfortunately leaving the organization open to risk.
In addition, the more comprehensive the coverage plan, the fewer chances for coverage gaps. When building insurance plans, an agent may access multiple markets to assemble a plan that works for a client. They may seek cyber from one carrier, professional liability from another and product liability from a third carrier. As agents know, there are several benefits to providing coverage through a single carrier. We see the most successful agents in this space guiding clients toward a single carrier that has a deep understanding of their unique risks. As a result, the customer benefits from a more seamless customer experience and the agent increases customer retention.
As the development of medical solutions continues to progress, agencies can help life sciences clients stay informed of potential coverage gaps to address their unique needs with flexible coverage and limit options and partner with experienced carriers that offer customizable, cohesive coverage solutions under a single policy. With an understanding the intricacies of the market, agents are well positioned to better protect their life sciences clients.