1 / 48

Malpractice Loss Trends 2007 Update DRI, March 15, 2007

Malpractice Loss Trends 2007 Update DRI, March 15, 2007. Kimber J. Lantry, Executive Vice President Hudson Insurance Group 851 Napa Valley Corporate Way, Suite N Napa, CA 94558 (707) 225-3301 (707) 224-6936 FAX klantry@hudsoninsgroup.com. Medical Malpractice Industry Combined Ratio.

walt
Download Presentation

Malpractice Loss Trends 2007 Update DRI, March 15, 2007

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Malpractice Loss Trends 2007 UpdateDRI, March 15, 2007

  2. Kimber J. Lantry, Executive Vice President Hudson Insurance Group 851 Napa Valley Corporate Way, Suite N Napa, CA 94558 (707) 225-3301 (707) 224-6936 FAX klantry@hudsoninsgroup.com

  3. Medical Malpractice IndustryCombined Ratio Source: Bests Aggregates & Averages, 2005 Property & Casualty edition

  4. Selected Company Results2005Source: A. M. Best Statistical Study, August 28, 2006

  5. SEVERITY

  6. Sources of Medical Malpractice Data • State by state filings - Little hospital data available as hospitals are written surplus lines - Quality varies by size, state requirements and quality of filing • St. Paul data – no longer available • Aon Study – largest available database - 84 hospitals; 63,000 bed equivalents; $250M premium in first $1M layer • Jury Verdicts Research - Countrywide, accurate, but only about 5% of all medical malpractice, skewed towards high severity • National Practitioners Data Base - Physician data only; no hospital data - Only closed claims = 5 year lag - No expense costs included • PIAA Data - Fear of competitors’ use = limited utility

  7. Median Medical Malpractice Jury VerdictsSource: Jury Verdicts Research, 2006 LRP Publications

  8. Mean Medical Malpractice Jury VerdictsSource: Jury Verdicts Research, 2005 LRP Publications

  9. National Practitioners Data BaseSeverity AnalysisSource: National Practitioner Data Bank Public Use File, June 30, 2006

  10. PIAA Data BaseSeverity AnalysisSource: PIAA, 2004

  11. Aon Risk Consultants, Inc., Medical Professional LiabilityPhysician Professional Liability BenchmarkHISTORICAL SEVERITY * *Based on non-zero claims only; Individual losses limited to $2M

  12. FREQUENCY

  13. FrequencyPer Earned Unit of ExposureSource: PIAA Data

  14. National Practitioners Data BaseFrequency AnalysisSource: National Practitioners Data Bank public use file, June 30, 2006

  15. Aon Risk Consultants, Inc., Medical Professional LiabilityPhysician Professional Liability BenchmarkHISTORICAL FREQUENCY PER CLASS 1 EQUIVALENT * * Number of claims per physician; for example, the 2003 year indicates 7 claims per 100 class 1 physicians.

  16. FREQUENCY AND SEVERITY TREND ANALYSIS

  17. Aon Risk Consultants, Inc., Medical Professional LiabilityPhysician Professional Liability BenchmarkHISTORICAL LOSS COSTS PER CLASS 1 EQUIVALENT * *Individual losses limited to $2M

  18. Frequency and Severity • Frequency = number of claims reported • Severity = average cost per claim • Frequency & severity trend factor • General Consensus: 6% - 7%, higher in jurisdictions without tort reform

  19. PHYSICIAN ISSUES

  20. Hospital vs. Physician Loss CostsSource: 2006 Update on U.S. Tort Cost Trends, Towers Perrin Tillinghast

  21. MEDICAL MALPRACTICE INSURANCE COMPANY RESULTS

  22. Medical Malpractice Premium Volume • 2005: $9,124,374 • Source: 2006 Best’s Aggregates & Averages – Property/Casualty • This doesn’t count: • Self insurance • Captives • Patient compensation funds • Risk retention and risk purchase groups • JUAs • Trusts

  23. Accident Year vs. Calendar Year • Accident Year = Results from all policies written during that year • Calendar Year = Results from all polices written during that year plus any reserve changes made to prior years • Virtually all published data is on a calendar year basis

  24. Loss Ratios for Medical Malpractice IndustrySource: 2006 Bests Aggregates & Averages – Property/Casualty

  25. Loss Adjusting Expense Ratios for Medical Malpractice IndustrySource: 2006 Bests Aggregates & Averages – Property/Casualty

  26. Incurred Loss Ratios for Medical Malpractice IndustryPure Loss + Allocated Loss Adjusting Expenses (ALAE) = Incurred Losses Source: 2006 Bests Aggregates & Averages – Property/Casualty

  27. Loss Triangles Source: Schedule P – Part 3F – Section 2 – Medical Malpractice Claims Made

  28. Expense RatioSource: 2006 Bests Aggregates & Averages – Property/Casualty • Consists of: • Costs to run company • Commissions to agents & brokers • Premium taxes

  29. Combined Ratio Source: 2006 Bests Aggregates & Averages – Property/Casualty

  30. Incident Date to Trial DateMedium Number of MonthsJury Verdicts Research, 2005

  31. Occurrence to Settlement Lag(in number of years)Source: National Practitioners Data Bank public use file, June 30, 2006

  32. Filing Date to Trial DateMedium Number of MonthsJury Verdicts Research, 2005

  33. Investment IncomeSource: 2006 Bests Aggregates & Averages – Property/Casualty • Med Mal companies hold on to each premium dollar for an average of 3 years

  34. Overall Operating Ratio“The Bottom Line”Source: 2006 Bests Aggregates & Averages – Property/Casualty

  35. Malpractice Industry Premium and Losses 1976-2005 Medical Malpractice Accident-Year Results ($ in millions)

  36. TORT REFORM

  37. Average Loss per Physician in States With and Without CapsLoss ($) per PhysicianSource: Richard S. Biondi & Arthur Gurevitch Contingencies November/December 2003 States without caps States with caps

  38. Malpractice Claims per Physician in States With & Without Caps - Claims per 100 PhysiciansSource: Richard S. Biondi & Arthur Gurevitch Contingencies November/December 2003 States without caps States with caps

  39. Differential in Loss per Physician in States With & Without CapsCapped States % of Uncapped StatesSource: Richard S. Biondi & Arthur Gurevitch Contingencies November/December 2003

  40. Malpractice Premium per Physician in States With & Without CapsPremium ($) per PhysicianSource: Richard S. Biondi & Arthur Gurevitch Contingencies November/December 2003 States without caps States with caps

  41. National Practitioners Data BaseFrequency Analysis – MichiganNOTE: Michigan enacted caps on non-economic damages in 1994Source: National Practitioners Data Bank public use June 30, 2006

  42. National Practitioners Data BaseSeverity Analysis - MichiganSource: National Practitioner Data Bank Public Use File, June 30, 2006

  43. Tort Reform • In 1975-77, in 1985-87 and in 2001-2003 numerous states enacted medical malpractice tort reform. • Five to seven years later (1980-82 and 1990-92), after court challenges to virtually every element of tort reform, approximately 50% was struck down by the states’ high courts. By that standard, we should start seeing the 2001-2003 tort reform start being struck down in 2007.

  44. State by State Tort Reform Initiatives Limits on Noneconomic/Pain and Suffering Damage Awards (as of March 15, 2005) ND $500k WA VT MT $250k MN ME $400k* SD $500k WI $350k1 ID $250k OR NH MI $500k* WY NY NE $500k1 IA MA - $500k OH $350k PA NV $350k IN $250k1 RI UT $400k CO $300k IL KS $250k MO $350k WV $250k CT CA KY VA* OK $300k NJ $250k TN NM $200k*1 NC DE AR AZ SC MS $350k GA $350k MD -$650k+* AL TX $250k DC LA $500k1* FL $500k* AK $400k* None < $250k $300 - 375k $400- 500k $500k and up HI $375k Source – National Conference of State Legislatures (January 13, 2005) *See notes for additional details 1 Cap is limit of liability for Providers; remainder to PCF

  45. THE FUTURE

  46. Medical Malpractice Crisis – What Crisis? HOSPITALS • Soft market has returned. Hospital excess insurance is the most competitive, but insurance bidding wars are increasingly common for primary as well. PHYSICIANS • Rate filing are commonly for modest declines. Large physician groups are enjoying insurance company bidding wars. Numerous carriers are aggressively attempting to expand market share.

  47. Factors Affecting The Market • “Class of 2001” is mostly doing well Arch Capital Ace Gen Star Endurance Specialty Berkeley Medical Excess Underwriters OneBeacon Darwin Underwriters • Availability of reinsurance support for new entrants • A plethora of risk retention groups and admitted physician company startups • Rush to self-insurance and captives is over

  48. The Future • Steadily softening market for the next 5 years or more • Continued new market entrants as industry profitability becomes clearer • Higher limits, broader policies • Likely to be followed by: • Unwinding of captives as commercial insurance market becomes cheaper • Followed by…inexorable rising of severity…and the next malpractice crisis

More Related