Net Medical Malpractice Claims Paid Did Not Increase Between 2000 and 2004
Net medical malpractice claims paid by 15 large insurers nationwide did not increase between 2000 and 2004, but net premiums increased by 120% over the same period, according to a study scheduled for release on Thursday by the consumer advocacy group Center for Justice and Democracy, the New York Times reports. The claims totals in the study are calculated net of reinsurance payments. According to the study, between 2000 and 2004, the increase in malpractice insurance premiums collected by the 15 insurers was 21 times the increase in paid claims. In addition, between 2000 and 2004, the incurred-loss ratio -- the ratio of claims to premiums collected -- for the 15 insurers decreased by almost 25% to 51.4%, the study found.
Nine of the 15 insurers reviewed in the study are mutual insurers owned by policyholders, and three are publicly traded companies that are part of larger conglomerates. The other three insurers reviewed are publicly traded companies that specialize in malpractice, and their stock prices each have each increased by more than 100% since May 2002. Jay Angoff, a consultant on the study and a former Missouri insurance commissioner, said, "In recent years, medical malpractice hasn't been unprofitable, but it's been phenomenally profitable."
According to Connecticut Attorney General Richard Blumenthal (D), the results of the study "have the potential to alter the debate fundamentally from seeming to cast the rapacious personal injury lawyers as the complete culprits and the insurers as innocent bystanders with doctors as victims to the insurers as equally responsible, if not more so."
Insurance industry officials questioned the methodology of the study. They said that the comparison of malpractice claims paid by insurers with premiums collected is unfair because claims often take eight to 10 years to develop and companies must maintain extra reserves. Lawrence Smarr -- president of the Physicians Insurers Association of America, which represents insurers owned by physicians -- said, "It's a meaningless comparison that no respectable actuary would consider." He added that malpractice insurance premiums have increased because juries have issued higher awards in lawsuits and insurers have used those awards as justification for the settlement of more claims. Smarr said, "The real problem is claim severity. It means that juries are awarding higher amounts and jury verdicts drive the potential cost of the claim so that makes settlements rise."
American Medical Association President Edward Hill said, "We have a proven record of the fact that the premiums will come down when you get strong liability reform -- that's why we're pushing caps on noneconomic damages" (Anderson, New York Times, 7/7).