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Capping Medical Malpractice Damages Does Not Lower Doctors' Premiums

Medical Malpractice Insurance Companies Inflated Losses, Consumer Group Reports

SANTA MONICA, CA -- January 6, 2005 -- Medical malpractice insurance companies inflated their estimates of incoming claims and used the figures to justify premium increases for doctors, according to a study by the consumer watchdog group, the Foundation for Taxpayer and Consumer Rights (FTCR). The companies then falsely argued that legislation capping medical malpractice awards would help lower insurance premiums, the report charged.

The insurers inflated their losses by an average of 46% between 1986 and 1994, the study said. They reported $39 billion in losses to regulators, although they eventually paid out only $27 billion in claims. The inflated estimates were greatest during economic downturns. In 1989, for example, loss estimates were overstated by 66%.

"By inflating their estimated 'losses' as much as 66%, medical malpractice insurance companies have misled regulators, lawmakers and the public and overcharged physicians and other health care providers," said Harvey Rosenfield, one of the authors of the study (FTCR Press Release, December 29, 2005). "Because all insurance companies use the same flawed accounting practices, it is likely that the insurance industry is responsible for several billion dollars in premium overcharges over the last few years, a period during which premiums have soared. The nation's economic stability and security demands that the insurance industry's accounting practices be investigated ..."

The FTCR study was based on the A.M. Best edition of Aggregates and Averages, an industry publication that gathers information from insurers' required Annual Statements filed with state insurance commissioners. Based on this data, the researchers were able to compare what insurers initially estimated that they would pay out on policies in effect from 1986 through 1993 with reports made 10 years later of what they actually paid out on policies from those years.

To learn more about medical malpractice lawsuits and your legal rights, see Medical Malpractice Claims.

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