Conning Says Med-Mal Crisis Worsens

The severe financial crisis afflicting the medical malpractice insurance industry is depleting that sector’s capital base more rapidly than previously thought, according to a new study by Conning Research & Consulting, Inc. The Conning Research study, “Medical Malpractice – Anatomy of a Crisis,” also finds that failure to resolve the current crisis jeopardizes America’s healthcare system as we currently know it.

“Unless we get meaningful and rapid reform, we forecast no end to the medical malpractice insurance industry’s financial problems” said Michael Weinstein, director of Research at Conning. “Conning forecasts no improvement in industry loss ratios for at least the next two years. The implication is the prospect of de facto, technical insolvency for this line of business.”

Conning’s study is a close examination of the root causes of the financial crisis. A sustained escalation in underwriting losses due to the increasing severity of claims costs has produced an unprecedented loss for the industry. Declining investment returns are not the root cause of rapidly rising medical malpractice insurance prices, contrary to popular theory.

In essence, the insurance industry has lost the ability to forecast losses, the foundation of adequately and appropriately pricing risk. As a result, insurance companies are exiting the medical malpractice insurance business, compounding the problem for buyers of insurance protection.

“This is a national crisis which requires solutions at the state level,” said Weinstein. “While we have examined a menu of potential solutions, we find no easy, quick fix to a very complex problem.”

“Medical Malpractice – Anatomy of a Crisis,” is available by visiting the company’s Web site at www.conningresearch.com.