Evidence of Insurance Industry Price Gouging

Medical Malpractice Insurers Overstated Payouts by up to 66%.

Congress Shouldn’t Be Deceived By Insurance Industry Efforts to Limit Patients’ Rights

While the insurance industry spends millions of dollars lobbying Congress for limits on compensation for malpractice victims, a new study shows the industry has consistently overstated its payouts by billions of dollars.

The Foundation for Taxpayer and Consumer Rights (FTCR) examined the official filings that malpractice insurers submit to state insurance commissioners and found that over a 9-year period, the amount insurers reported they would pay out on policies was 46% more -- approximately $12 billion – than what they actually did pay to victims.

The malpractice insurance industry grossly overstated its payouts every year in the 9-year period FTCR examined, and in one year, overstated payouts by 66%.

"By manipulating their books to misrepresent their 'losses', the insurers have profited in two ways. First, they have used the inflated numbers to justify rate increases that were unnecessary and excessive. Second, they have invoked their exaggerated loss estimates to promote legislation allowing these insurers to limit how much compensation they have to pay out to victims of medical negligence," said FTCR's Harvey Rosenfield.

The study adds further evidence that the cause of periodic rate hikes is the nature of the insurance cycle and lack of regulation of malpractice insurers. The solution to malpractice premium hikes is insurance reform.

On the Hill

A front group for medical associations, “Doctors for Medical Liability Reform” (DMLR), is circulating a short video urging Congress to limit patients’ rights while allowing insurance industry price-gouging to continue.

Though billed as a “mini-documentary,” it’s more like pulp fiction – dramatic and scary but not very truthful. The video repeats the widely-debunked myths the insurance and pharmaceutical companies make to lobby for changes in the law to allow them to be unaccountable to patients.

By the Numbers

• $12 billion. Amount malpractice insurers overstated payouts between 1986 and 1994, an overstatement of 46%.
• $15 billion. Amount malpractice insurers will have overstated payouts between 1995 and 2003, if historical loss inflation is an indicator of current trends.

Source: Foundation for Taxpayer and Consumer Rights

Used with permission from The Association of the American Trial Lawyers of America.  All rights reserved.