Insurers big premium hikes

Malpractice insurers raise
premiums while payouts stay low

By David Baker

First published July 13, 2005 and reprinted in response to a renewed campaign by liability insurers for "reform" - i.e, further restrictions on an injured patient's ability to recovery damages.

Over the past five years, premiums paid by doctors and medical facilities for malpractice insurance have more than doubled, as insurance companies blamed big verdicts, and called for limits on awards for pain and suffering, something the Bush Administration has strongly supported.

But now a new study shows that while the amount charged by the nation’s 15 largest malpractice insurers for coverage increased 120 percent between 2000 through 2004, the amount paid out by them during that time went up just 5.7 percent.

Some insurers actually had a decrease in payouts but still increased premiums, according to the study. For example, Healthcare Indemnity Inc. increased its premiums by 88 percent during the five years, while the amount it paid out fell 32 percent.

Another company, Medical Assurance, did even better. It increased its premiums by $151 million, or a whopping 89 percent, while its payouts went down by a third. This meant that in 2004 Medical Assurance paid out just 10 cents in claims for every dollar it collected in premiums.

The study, released by the Center for Democracy and Justice, uses information included in the insurers’ annual reports to state insurance departments.

The study also found that during the past three years, the 15 insurers increased their surpluses – the amount by which money set side for claims exceeded actual payouts – by an average of one third. Two of the companies, Healthcare Indemnity and Norcal, increased their surpluses by more than 50 percent.

The report also notes that the three insurers studied that are traded on the stock exchange all saw their stock prices double between 2001 through 2004, while the Down Jones Industrial Average remained almost unchanged.

A story on the study was distributed by the Associated Press and therefore is available to newspapers around the country and in the Capital Region.

The full study “Falling Claims and Rising Premiums in the Medical Malpractice Industry” was prepared by former Missouri Insurance Commissioner Jay Angoff and was commissioned by the Center for Justice & Democracy (CJ&D). The report was co-released by several national consumer organizations: CJ&D, Alliance for Justice, Consumer Federation of America, Public Citizen, USAction and U.S. PIRG.

It is available as a PDF download at the Center for Democracy and Justice Web site at:

www.centerjd.org