AIA Says Consumer Group Report on N.J. Med-Mal is Misleading

The American Insurance Association (AIA) said that a “new” study released on Jan. 31, by Americans for Insurance Reform (AIR) outlining supposed reasons for the medical malpractice crisis in New Jersey is misleading and inaccurate. AIA noted that this “new” study is nothing more than a recycling of an old national study AIR released last year.

“AIR suggests that the current problems in the medical malpractice insurance market are tied to insurers’ losses in the stock market. This is an incomplete oversimplification at best,” Tammy Velasquez, AIA assistant vice president, mid-Atlantic region, said. “Further, the study’s assertion that medical malpractice claims payments have remained flat over the last decade is flat-out wrong.”

“As a legal requirement, insurance rates for medical malpractice insurance – as for other lines of insurance – are based on estimates of future losses and future investment income. Insurance companies are expressly prohibited by law from attempting to recoup prior losses through future rates. Any unanticipated losses must be paid from the company’s own capital. In other words, policyholders do not pay for any past losses in current premiums,” Velasquez commented.

“The fact is that increasing claims costs have played a much more significant role in driving ultimate insurance results and premium rate increases than falling investment gains,” Velasquez added.

Between 1997 and 2001, medical malpractice claim losses increased 109.5 percent while gains from investments attributed to the line fell 21.4 percent, according to A.M. Best.

“Despite what AIR would lead New Jersey residents to believe,” Velasquez explained, “one of the chief underlying forces driving current conditions in the medical malpractice insurance market is the tort liability system.”

States with caps on non-economic damage awards, such as California and Virginia, reportedly are not having major problems with medical malpractice insurance.

“The solution lies in medical malpractice tort reform,” Velasquez added. “Only comprehensive reform will bring fairness and predictability back to the medical liability system.”