Type of Document Dissertation Author Neale, Faith Roberts URN etd-07122004-100943 Title Healthcare Professional Liability Insurance: An Examination of the National and Florida Markets Degree Doctor of Philosophy Department Risk and Insurance, Department of Advisory Committee
Advisor Name Title Kevin Eastman Committee Chair Jim Carson Committee Member Pamela Peterson Committee Member Patrick Maroney Committee Member Keywords
- Liability Crisis
- Insurance Cycles
- Tort Reform
- Medical Malpractice
- Underwriting Cycles
Date of Defense 2004-06-22 Availability unrestricted AbstractABSTRACT
A comprehensive examination of the current condition and performance of medical malpractice insurance on a national basis and in the Florida market finds evidence that a crisis does exist. Specifically, from 2001 to 2002, the number of insurers nationwide writing positive direct premiums fell 40 percent; in part, because insurers are unable to raise premiums in proportion to increased losses.
Bivariate Granger Causality analysis indicates that 1999, 2000, and 2002 losses are explained by the past two years premiums and losses; however, 2001 losses are not. Further, 2001 is the only year examined that incurred significant annual growth in the median of every performance variable tested. Significant deterioration in direct losses incurred, net investment income, policyholder surplus, and the loss ratio over time is also found. In addition, the annual average growth rate in direct losses incurred significantly increased from 1995-1998 to 1998-2001, while net investment income, policyholder surplus, and the loss ratio significantly deteriorated between these two time periods.
An examination of the causes of this deterioration in the national market finds positive relationships between both direct losses incurred and policyholder surplus with net premiums written. A negative relationship is found between the amount of reinsurance ceded and net premiums written. An analysis of the Florida market reveals total claim costs are positively related to direct premiums written and Florida insurers experienced a significant deterioration in loss ratios. The evidence supports the contention that losses increased more than expected while investment income fell below expectations. There is no evidence to support the claim that insurance companies have been mismanaged.
States with $250,000 caps on non-economic damages experience lower growth in loss ratios than states with no caps and states with modified caps. Also, the effect of rising defense costs on direct premiums written is not as large in states with total caps on non-economic damages. Lastly, ceteris paribus, insurers in the state of Florida would have realized savings of at least $538 million dollars, or 22 percent of total damages paid, if $250,000 caps on non-economic damages had been in place from 1991 to 2003.
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