The profitability of selling medical malpractice insurance has skyrocketed in recent years. Consequently, most malpractice insurance companies have routinely “over-reserved” (set aside more profit) than is necessary. These are among the findings of former Missouri Insurance Commissioner Jay Angoff, who recently analyzed the 2006 financial statements of the 15 largest medical malpractice insurance companies in the U.S., and issued a report entitled, “No Basis for High Insurance Rates: An Analysis of the 15 Largest Medical Malpractice Insurers’ 2006 Financial Statements.”
According to the Angoff Report, the 15 largest insurers paid out an average of 31.4 cents in claims for every dollar they collected in 2006. That means that for every $1 that a hospital or health care provider paid in insurance premiums, insurance companies were able to keep 68.6 cents, using that money to fund, “…executive salaries, marketing and advertising, and lawyers and lobbyists,” among other things. What the companies didn’t spend on those things, they continued to hold in reserve.
Further, the report notes that over the last three years, the economic losses of the 15 largest insurers fell by 50%, even as many publicly claimed that their losses were increasing.
The report comes at a time when physicians and other health care providers are decrying the prohibitive cost of malpractice insurance, and while health care costs in the U.S. continue to rise exponentially. The Angoff Report shows, among other things, the flawed logic underpinning current tort reform measures, and illustrates the critical need for better regulation of the insurance industry.
For a comparison, please see the previous posting on the DC Medical Malpractice Law Blog about the 2005 Angoff report.
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