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Not only is the size of medical claims on the rise, the definition of malpractice is being broadened to include "failure to detect." That’s the result of a new survey by Conning & Co., an insurance consulting company in Hartford, CT, that also suggests malpractice insurance rates are headed up.
Doctors are being held liable for diagnostic tests they are unable to perform based on the existing structure of some managed care companies, giving rise to the "failure to" litigation, says Geri Riley, vice president at Conning & Co. and author of the study. The survey also discusses the increased frequency of million-dollar claims, as juries have been desensitized to how large a sum of money this is.
According to the Conning survey, "Medical Malpractice Insurance: Ills Diagnosed, Cures Elusive," 72% of medical malpractice insurance writers surveyed believed that the broadening definition of malpractice, particularly "failure to detect," was an important challenge facing the industry. Interestingly; only 53% of medical malpractice insurers cited the need for tort reform as an important issue; and only 58% of medical malpractice insurers reported that the erosion of ERISA protection (HMO’s being cleared from malpractice suits) was an important issue.
"Failure to detect’ litigation is imposing a huge burden on the medical malpractice industry," Riley says.
The runaway costs of claims in a market where competition for new policies is already fierce presents a dismal outlook for the medical malpractice industry, Riley says. The Conning survey indicates that insurers hope to raise rates and gain market share, an unrealistic goal in the current medical malpractice insurance environment. Further, Conning concluded that many of these insurers do not have a focused strategy of how to reduce claims costs.
Eighty-one percent of medical malpractice writers surveyed indicate that their companies would experience higher costs. Seventy-six percent of survey respondents indicate that their companies intend to raise rates. These survey responses reflect the trend of worsening combined ratios. The medical malpractice combined ratio has increased substantially since 1994, when it was 98%, reaching 128.3% in 1999, a trend that does not appear to be changing course by analyzing the above numbers.
The entire Conning survey, "Medical Malpractice Insurance: Ills Diagnosed, Cures Elusive," is available from Conning & Co. for $295 by calling (888) 707-1177, or can be purchased through the company’s Web site at www.conning.com.