Report hit for linking premium costs, claims

Medical liability insurers say the report, which found premiums rose 21 times faster than claims, is flawed.

By Mike Norbut — Posted Aug. 8, 2005

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The association representing physician-owned insurance companies is criticizing a recent report that says medical liability insurers are raising premiums while claims have remained flat.

The report, released last month by the New York-based Center for Justice & Democracy, says claims payments for all the companies studied rose only 5.7% between 2000 and 2004 while premiums jumped 120.2%. Some companies even saw claims drop over the period, according to the study.

The data suggest that insurance companies are overcharging physicians for their liability insurance, according to Jay Angoff, the study's author and former Missouri Insurance Commissioner.

The study looks at data from the 15 largest liability insurers ranked by A.M. Best, the insurance rating and information company. It includes information from both publicly owned companies and doctor-owned mutual companies. Researchers collected data from the companies' annual statements. They found premiums rose 21 times faster than claims payments, leading to insurers collecting record surplus amounts in the last three years.

"Those overcharges are obviously bad news for doctors, but they have resulted in good news for investors in the leading pure malpractice insurance stocks, which have doubled during the last three years while the stock market as a whole has remained flat," Angoff said.

The Physician Insurers Assn. of America, however, says the study is flawed because it makes many incorrect assumptions, including the notion that there's a connection between premiums and claims recorded in the same year. Because it takes years for some claims to work their way through the system, it's unrealistic to compare revenue and payouts on a year-by-year basis, the association said.

The American Medical Association concurred with PIAA's concerns.

PIAA also accused the Center for Justice & Democracy of representing trial attorneys. On its Web site, the center calls itself a "tax-exempt nonprofit, nonpartisan public interest organization."

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