The NewStandard ceased publishing on April 27, 2007.

Malpractice Insurers Regularly Overstated Claims, Study Finds

by Brendan Coyne

Dec. 30, 2005 – A consumer advocacy group has found that more than a decade ago, medical-malpractice insurers reported inflated costs to state regulators, used those numbers to charge higher rates to doctors and hospitals, and then later reported costs far below the initial estimates.

In a comprehensive analysis, the Foundation for Taxpayer and Consumer Rights (FTCR) found that insurance companies reported loss expectations of nearly $40 billion to state insurance regulators from 1986 to 1994 but paid out less than $27 billion in claims for the period. Comprehensive data is unavailable for 1995 and later. The study examined data from annual state insurance commission reports compiled into an annual report by the data collection service A.M. Best.

"By inflating their estimated ‘losses’ as much as 66 percent, medical-malpractice insurance companies have misled regulators, lawmakers and the public and overcharged physicians and other healthcare providers," FTCR founder Harvey Rosenfield said in a statement announcing the study. "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."

Insurers maintain that currently, their costs may actually top reported losses in any given year when all factors are figured in, a claim that is not readily verifiable due to the fragmented way in which malpractice liability insurance information is reported, gathered and compiled.

The FTCR study closely matches the findings of a Center for Justice and Democracy report released last summer showing that the nation’s largest insurers are taking in more than double what they did just five years ago while paying claims at or barely above the same level as 2000.

That study, conducted by former Missouri Attorney General Jay Angoff using recent data reported to state insurance regulators, found that companies have been increasing premiums at rates far exceeding projected losses. Angoff also worked on the FTCR report.

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The NewStandard ceased publishing on April 27, 2007.


Brendan Coyne is a contributing journalist.

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