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Falling Claims and Rising Premiums in the Medical Malpractice Insurance Industry

Authored by Jay Angoff for the Center for Justice & Democracy, 7 July 2005

A new study of medical malpractice insurance providers has found that insurance companies have been price-gouging doctors by drastically raising their insurance premiums, even though claims payments have been flat, or in some cases decreasing. The study analyzed data from the 15 largest insurance companies' 2004 Annual Statements, which are filed under oath with state insurance departments.

Insurance Industry Deceit
For years, medical malpractice insurance carriers have argued that malpractice claims payouts have increased dramatically, forcing the companies to raise the malpractice premiums they charge doctors to cover the payments.

However, researchers found that in the past five years premiums have more than doubled, while claims payments have been stable. In fact, in 2004, malpractice insurers' total premiums were three times higher than their total payouts. Between 2000 and 2004, insurers' net premiums increased by 120%, while net claims payments increased by less than 6%.

Premiums Rising - Claims Payments Falling - HCI
Several top insurers actually saw their claims payouts fall, yet still increased premiums.

For instance, Healthcare Indemnity, Inc. (HCI) raised its premiums by $173 million (88%), while its claims payments fell by $74 million (32%).

Other examples include:

• ProNational increased its premiums by $87 million while simultaneously dropping its claims payments by $43 million (63%). The insurer paid out only 13 cents on every premium dollar taken in.
  
  
• Medical Assurance raised its premiums by $151 million (89%), while its claims payments decreased by one third. The insurer paid out just 10 cents on every premium dollar taken in.

Record-Breaking Profits for Insurance Companies During "Crisis"
Insurance companies have tried to justify the dramatic premium increases, despite flat claims, as being the result of future, as yet unknown payouts. However, data show the insurance companies raised premiums while simultaneously reducing their projected future payouts.

The increase in premiums along with the reduction in actual and projected losses has resulted in an increase in surplus for insurers of nearly $1 billion over the past three years.

That amount is more than twice what national experts at the National Assocation of Insurance Commissioners recommend they need.

As Missouri Attorney General Jay Nixon says, "There is no excuse for malpractice insurers doubling their rates while their claims payments decrease."

Press Release | Backgrounder | Full Study

July 2005