© 2005 Towers Perrin 1 Medical Malpractice Overview Financial Update Claim Trends and Observations...
-
Upload
arleen-harrison -
Category
Documents
-
view
218 -
download
0
Transcript of © 2005 Towers Perrin 1 Medical Malpractice Overview Financial Update Claim Trends and Observations...
© 2005 Towers Perrin 1
Medical Malpractice Overview
Financial Update
Claim Trends and Observations
Market Realities
PLUS Medical PL Symposium
March 16, 2005
March 16, 2005
James D. Hurley ACAS, MAAA
© 2005 Towers Perrin
Medical Malpractice – Financial Update
This document is incomplete without the accompanying discussion; it is confidential and intended solely for the information and benefit of the immediate recipient hereof.
3© 2005 Towers Perrin
Medical Malpractice — Financial Update
Source: AM Best’s Aggregates and Averages
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
Combined
4© 2005 Towers Perrin
Medical Malpractice – Financial Update
33.7%
26.3%
7.5%
-6.2%
-19.4%-17.1%
-22.3%
-30%
-20%
-10%
0%
10%
20%
30%
40%
1997 1998 1999 2000 2001 2002 2003
Calendar Year
One Year Loss Reserve Development to Premium
Industry
5© 2005 Towers Perrin
Medical Malpractice — Financial Update
Source: AM Best’s Aggregates and Averages
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
Combined Investment Income
6© 2005 Towers Perrin
Medical Malpractice — Financial Update
Source: AM Best’s Aggregates and Averages
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
Combined Investment Income Operating
7© 2005 Towers Perrin
Medical Malpractice — Financial Update
Messages
Financial results – a work in progress
Underwriting Combined ratio still too high
— Best says 130% for 2004 and 2005— Composite of 30 companies ≈ 110% for 2004
Rate increases still to be ‘felt’ Question is reserves
8© 2005 Towers Perrin
Medical Malpractice – Financial Update
27.1%
33.7%
27.7% 26.3%
21.7%
7.5%
15.0%
-6.2%
5.8%
-19.4%
-4.8%
-17.1%
-5.1%
-22.3%
-1.6%
-30%
-20%
-10%
0%
10%
20%
30%
40%
1997 1998 1999 2000 2001 2002 2003 2004
Calendar Year
One Year Loss Reserve Development to PremiumPIAA vs. Industry
Composite Industry
9© 2005 Towers Perrin
Medical Malpractice — Financial Update
Messages (cont’d)
Investment income Still evolving – ‘numerator / denominator’ problem Expect lower than 2003 Interest rate increase – ‘talk is cheap’
Capacity still under pressure, but stabilizing premium-to-surplus leverage 1:1?
(no helpfor 2004 and 2005)
11 GE Insurance SolutionsRaymond BirkinshaMarch 2005
TORT REFORMBush Administration Strongly Urging Congress to Reintroduce a Bill Limiting Non-economic Damage Awards to $250,000, Limit Punitive Damage Awards, Place Limits on Time Allowed to Injured Patients to File a Lawsuit & Establish Fee Schedule for Lawyers’ Contingency Fees
Reform Passed in Nevada & Florida (Nov. ’04) • Nevada… Reform Eliminates All Exemptions on a 2002 Law That Caps Awards for Pain
& Suffering in Medical Malpractice Cases at $350,000• Florida… Reform Puts Constitutional Limit on Lawyers Fees
Maryland General Assembly Signed in New Law (Jan ’05)…• Imposing Tax on HMOs to Subsidize Doctor’s Med Mal Insurance Premiums• Freeze Noneconomic Damage Award Limits at $650,000 for Next Four Years• Reduce Limits on Noneconomic Damages in Wrongful Death Suits From US$ 1.6 MM to
US$ 812,500Ohio passed tort reform legislation for third time:
• Maximum Non- Economic Damages $350,000 Per Plaintiff Or $500,000 Per Occurrence.
Mississippi (June ’04)… Reform Bill Limiting Damages for Pain & Suffering to US$ 500,000 in Medical Malpractice Cases and $1 MM in Other Cases... Restrictions on Punitive Damage Awards Also Included
12 GE Insurance SolutionsRaymond BirkinshaMarch 2005
APPEAL BONDS
The Issue: Insolvent Carriers leading to Bond Issues
The Solution: Caps on Bonds
• GEORGIA $25,000,000 • VIRGINIA $25,000,000 • NEBRASKA 50% or $50,000,000• IOWA $100,000,000 • MINNESOTA $100,000,000• SOUTH CAROLINA NO BOND!
13 GE Insurance SolutionsRaymond BirkinshaMarch 2005
0
200
400
600
800
91 92 93 94 95 96 97 98 99 00 01 02
0
10
20
30
40
# P
aym
ents
Source: National Practitioners Data Bank Public Use Files; AON HealthLine Special Edition 2003
Claim
s P
er 1 ,0 00 Ho
sp
i ta l Be d
s
Claims Per 1K Hospital Beds
Payments
More than 800 paymentsover $1MM in 2002
HOSPITAL SEVERITY
14 GE Insurance SolutionsRaymond BirkinshaMarch 2005
2004 Claims By Medical Specialties
3%10%
26%
34%
18%
9%
Diagnosis Related
Surgery Related
Treatment Related
Obstetries Related
Anesthesia Related
OthersSource: National Practitioner Data Bank Public Use File - Data To
September 2004
15 GE Insurance SolutionsRaymond BirkinshaMarch 2005
2004 Indemnity By Medical Specialty
4% 8%
23%
34%
15%
16%
Diagnosis Related
Surgery Related
Treatment Related
Obstetries Related
Anesthesia Related
OthersSource: National Practitioner Data Bank Public Use File - Data To September
2004
16 GE Insurance SolutionsRaymond BirkinshaMarch 2005
VERDICTS
$76,000,000 Impaired Infant Verdict (NJ)
$63,000,000 Use of Forceps (FL)
$32,000,000 Impaired Infant (IL)
$30,000,000 Impaired Infant (OH)
$27,600,000 Impaired Infant (KY)
$23,300,000 Impaired Infant (IL)
$12,500,000 Impaired Infant (IL)
17 GE Insurance SolutionsRaymond BirkinshaMarch 2005
SETTLEMENTS
$15,000,000 Hypoxic Birth Injury
$17,250,000 Failure to Monitor Anticoagulation
$18,000,000 Pre-eclampsia Allegations
$20,000,000 Brain Injury Post Surgery
$20,000,000 Failure to Perform C-Section
$35,000,000 Birth Trauma – Brain Injury
18 GE Insurance SolutionsRaymond BirkinshaMarch 2005
PLAINTIFF’S SUCCESS
Developed Plaintiff’s Models
Focus on Emotion
No Incentive To Settle
Less Cooperation
Value of Money
19 GE Insurance SolutionsRaymond BirkinshaMarch 2005
• Jury Selection
• Mock Trials
• Trial Consultants
• Sophisticated Evidence and Exhibits
RESOURCES
20 GE Insurance SolutionsRaymond BirkinshaMarch 2005
THE NURSING HOME MODEL
Surveys
Ex-Employees
Medical Chart
Loss of Dignity
21 GE Insurance SolutionsRaymond BirkinshaMarch 2005
TRENDS
FEWER PLAYERS
MORE INSOLVENCY ISSUES
LARGER RETENTIONS
RESTRICTIVE COVERAGE
TORT REFORM
22 GE Insurance SolutionsRaymond BirkinshaMarch 2005
RECOMENDATIONS
Support Tort Reform
Professional Claim Analysts
Identify the Big Cases
Evaluate Cases Early
23 GE Insurance SolutionsRaymond BirkinshaMarch 2005
RECOMENDATIONS
See Resolution as a Process
Engage Appropriate Resources Counsel Experts Trial Resources Witness Coaches
March 16, 2005 James D. Hurley ACAS, MAAA 24Leadership. Innovation.Results.
INSURING THE FINANCIAL HEALTH OF HEALTHCARE PROVIDERS
Gallagher Healthcare
Medical MalpracticeMarket Realities
Philip E. Reischman
Gallagher Healthcare Insurance Services, Inc.
March 16, 2005
Leadership.Innovation.Results.
25
U.S. Medical MalpracticeCurrent Market Realities
Most Carriers Are Making Money Capacity Continues To Expand
New Players Greater Appetite More Flexibility
Alternative Markets Will Not Go Away Captives are Long-Term Commitment Excitement of Underwriting Profits More Fronting Options
Leadership.Innovation.Results.
26
U.S. Medical MalpracticeCurrent Market Realities
Some Start-Ups Will Fail Low Volume Expense Ratios
Carrier Ratings Are Still A Concern Downgrades Flight To Quality
Tort Reform And Risk Management Are Driving Rate Decreases
Contingent Commissions Not Material
Leadership.Innovation.Results.
27
U.S. Medical MalpracticeClient vs. Market Perceptions
Issue Client Perspective Market PerspectiveSpecific Retention Once forced, now About right
voluntary
Aggregate Retention Most want at reasonable Few offer; highattachment points/price attachment point
Rates & Premiums Must go down Inflationary increase
at minimumMulti-Year Programs Hesitant Hesitant
Leadership.Innovation.Results.
28
Insureds
RatesDown
RatesUp
Insurers
It’s part of the cycle,so manage through it!