Connecticut AG Blumenthal recently slammed medical malpractice insurers for raising rates faster than current payouts are rising. According to Specialty Insurance Blog: Insurers are to Blame, he's citing a recent advocacy piece written by Jay Angoff, former Missouri insurance commissioner, a lawyer who represents trial lawyers and consumer advocacy groups. See: Illinois Civil Justice League: Will the REAL 'conflict of interest' be raised?
See: Attorney General Calls For Immediate Review Of Medical Malpractice Insurance Rates; Cites Troubling Consumer Report (Press Release from Conn. Attorney General July 7, 2005).
Advocacy pieces often overlook the sorts of long-range statistics that show that the insurance cycle lags the med mal expense cycle for many complex reasons. Advocates will frequently select a relatively small time frame to compare data, without referencing long periods in which insurance prices and profitability fell year after year until large insurers collapsed leaving hundreds of millions in claims unpaid.
Following such market collapses, reinsurers and surviving companies must rebuild reserves in order to gain enough strength to survive the next round of price wars, often initiated by government-subsidized insurance pools, JUAs and patient compensation funds. The key roles of below-cost providers (often physician owned) in aggravating the insurance cycle is well documented. Some of the objective, scientific studies are referenced in a recent working paper available on this website at: Unintended Consequences: Causes of the Medical Malpractice Crisis? (March 17, 2005.
Insurers have long made a convenient whipping boy for advocates seeking to avoid dealing with the complex issues of markets in long-tail lines in which governments periodically introduce below-cost competition. Its complicated by the special legal and accounting rules allowed (required) for insurers. Prof. Martin (author of the RiskProf blog comments on these regularly, such as in his guest post in: Evan Schaeffer's Legal Underground: Continuing the Med-Mal Debate: Insurance as a Whipping Boy? (Jan. 12, 2005)
Let us hope that Attorney General Blumenthal maintains his objectivity and reads more than one side of a complicated story in which the last four years' experience is only a small part of a much larger economic story.Posted by dougsimpson at July 8, 2005 11:00 AM