Summary - Falling Claims and Rising Premiums in the Medical Malpractice Insurance Industry

A new study of medical malpractice insurers entitled “Falling Claims and Rising Premiums in the Medical Malpractice Insurance Industry” 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.

Key Findings
The study, conducted by former Missouri Insurance Commissioner Jay Angoff for the Center for Justice and Democracy, a consumer advocacy organization, compiled data from the 2004 annual reports of the 15 largest insurance companies, which are filed under oath with state insurance departments. According to the insurance companies’ own numbers:

  • Over the last five years, the amount malpractice insurers have collected in premiums has increased by 120%, while claims payouts have remained essentially flat.
  • During this time, even industry projections of claims they plan to pay out in the future – their justification for higher premiums – have decreased.
  • Leading insurers increased their surpluses by a third – to a level far above what is recommended by the National Association of Insurance Commissioners.

Reaction from Attorneys General and Insurance Commissioners Throughout the Country
“The data in the Annual Statements filed under oath with state insurance departments, which this Report discloses, call into question much of what the medical malpractice insurance industry has been saying publicly during the past several years. There is no excuse for malpractice insurers doubling their rates while their claims payments decrease.”
-Missouri Attorney General Jay Nixon

“[The numbers in the study] cast a completely different picture than the public or many public officials have assumed. Clearly the numbers underscore the need for much tougher and much more aggressive oversight to prevent and punish profiteering. Insurance company greed can be hazardous to our health.”
-Connecticut Attorney General, Richard Blumenthal

“We are definitely disturbed by the numbers in this report, which offers evidence that doctors may be paying excessive premiums. If these carriers truly have loss ratios that are this low and yet they are still increasing rates, one has to wonder if they're gouging.”
-Michigan Office of Financial and Insurance Services Commissioner Linda A. Watters

“Doctors and consumers deserve to see the facts behind the true crisis, which is that insurance companies are price-gouging their doctors, not an explosion in claims.”
-J. Robert Hunter, Director of Insurance for the Consumer Federation of America and a former Texas Insurance Commissioner and Federal Insurance Administrator.

“Without insurance industry reform, we won't see a significant drop in premiums.”
-Bonnie Bowles, Executive Director, Missouri Association of Osteopathic Physicians and Surgeons

What Does This Mean?

  • Insurance companies have been price-gouging doctors by drastically raising their insurance premiums, even though claims payments have remained flat.
  • Insurance companies manufactured a “crisis” through a calculated and aggressive effort of egregious price-gouging all to exploit the situation as reason for eliminating basic rights and just compensation for injured health care consumers.
  • The insurance industry is paying millions of dollars to corporate lobbyists to eliminate protections for victims of medical negligence by imposing caps, but study after study has shown caps do not lower insurance premiums.
  • The industry’s record-setting profits say it all. They have the money and the power to lower medical malpractice insurance rates but instead have chosen a campaign of deception and fraud to protect their bottom line.

Dubunking the Insurance Industry’s Claims
Insurance Industry Says:
It is unfair to compare the premiums that insurance companies charge with claims paid, because it often takes 8 to 10 years for the claims to materialize, so companies have to set aside extra reserves.

The Truth Is:
The industry’s own numbers show they project a decline in payouts. Projected claims have to be based on something, and for the last five years payouts have been constant.

Insurance Industry Says:
Premiums are rising as a result of larger jury awards that force insurers to settle more cases.

The Truth Is:
Total payouts remained constant – increasing by less than 6% in five years. And according to the Physicians Insurers Association of America’s own data, the percentage of cases settled has dropped from 32% in 2001 to 22.5% in 2004.

Insurance Industry Says:
Caps will lower premiums.

The Truth Is:
Premiums in states without caps are actually 9.8% lower than those with caps. After California, Mississippi, Nevada, Ohio, Oklahoma, and Texas passed caps, insurers in those states continued to raise rates. If rising claims aren’t the cause of premium hikes, then why would limiting compensation for victims lower rates? Take it from the industry itself. Lawrence Smarr, president of PIAA, admitted to the Detroit News (7/8/05) that premiums are in part rising to make up for lost investment income. And Dennis Kelly of the American Insurance Association has said, “We have not promised price reductions with tort reform.” [Chicago Tribune, 1/3/05]