Reply #53: Past medical malpractice "crises" have corresponded to economic downturns

[PA Democrat]

Insurance Industry Economics Have Caused the Premium Price Spike

• "For several years, insurers kept prices artificially low while competing for market share and new revenue to invest in a booming stock market. As the bull market surged, investments by these historically conservative insurers rose to 10.6% in 1999, up from a more typical 3% in 1992. With the market now in a slump, the insurers can no longer use investment gains to subsidize low rates." (American Medical Association Report 35 of the Board of Trustees (A-02), available at:
http://www.ama-assn.org/ama1/upload/mm/annual02/bot35a02.rtf.)




• Premiums charged do not track losses paid, but instead rise and fall in concert with the state of the economy. When the economy is booming and investment returns are high, companies maintain premiums at modest levels; however, when the economy falters and interest rates fall, companies increase premiums in response. (J. Robert Hunter, Americans for Insurance Reform, "Medical Malpractice Insurance: Stable Losses/Unstable Rates," October 10, 2002. See also: http://www.insurance-reform.org/StableLosses.pdf.)

http://www.citizen.org/congress/civjus/medmal/articles.cfm?ID=9125