THE FIVE MYTHS OF MEDICAL MALPRACTICE: MYTH #4

THE FIVE MYTHS OF MEDICAL MALPRACTICE: MYTH #4

THE FIVE MYTHS OF MEDICAL MALPRACTICE: MYTH #4 150 150 Dan Frith

Myth #4: Malpractice Claims Drive Up Doctor’s Medical Malpractice Insurance Premiums.
There is little correlation between malpractice payouts and malpractice premiums paid by doctors. Researchers at the National Bureau of Economic Research (NBER) reported that, “increases in malpractice payments made on behalf of physicians do not seem to be the driving force behind increases in premiums.” Similarly, Americans for Insurance Reform (AIR) conducted an analysis of the relationship between insurance payouts and premiums charged to doctors and found that, “[n]ot only was there no ‘explosion’ in lawsuits, jury awards or any tort system costs to justify the astronomical premium increases that doctors have been charged in recent years. These rate increases were rather driven by the economic cycle of the insurance industry, which has been driven by the decline in interest rates and the return on investments.

This insurance cycle is at the heart of the medical malpractice debate, but few people understand how it works. There are two main sources of income for insurers: underwriting income – the amount of premiums they don’t give back in payouts, and investment income – the money they make investing the premiums. When investment income is down, insurers must make up the difference by increasing underwriting income which they do by increasing premiums.

And just how hard hit are the insurance companies who insure our doctors? An analysis by the American Association for Justice (AAJ) of the 2008 annual financial statements filed by the 10 largest malpractice insurers found that the average profits of these companies are higher than 99 percent of all Fortune 500 companies and 35 times higher than the Fortune 500 average for the same time period.

Medical malpractice insurers have underestimated profits and overestimated losses in part to justify new legislation to restrict the rights of those injured by medical negligence.

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About the author

Dan Frith

Dan Frith has over 25 years of experience representing individuals and families in cases of medical malpractice throughout Virginia. He has been named "Best Medical Malpractice Attorney" by Roanoker Magazine and is a member of the Million Dollar Advocates Forum. To speak with Dan, contact him by email at dfrith@frithlawfirm.com.

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