Florida Medical Malpractice Insurance Market Found in Good Health

Medical malpractice insurers writing in Florida earned an average return on surplus of 6.6 percent in 2009, their sixth straight profitable year, although their profits were lower than in 2008.

That’s one of the news items in the state’s 2010 annual medical malpractice insurance market report released by the Florida Office of Insurance Regulation that paints a relatively positive picture. The report features 2009 data compiled from rate filings, financial data, and the closed-claims database.

The return on surplus is a national number taking into account profitability in states other than Florida and other lines of insurance. The return on surplus for leading companies only writing medical malpractice in Florida was 8.4 percent.

While still positive, the return is declining. The average return on surplus was 9.5 percent in 2008, 11.0 percent in 2007 and 19.7 percent in 2006.

The report compares Florida’s medical malpractice to data from nine other states with the largest medical malpractice markets: California, Georgia, Illinois, Massachusetts, New York, New Jersey, Ohio, Pennsylvania, and Texas. The report showed that Florida’s loss ratios, and non-loss costs were competitive with other states in this peer group.

The industry paid an estimated $736.9 million in claims in 2009 in Florida; $570.3 million in damages and the remainder in loss adjustment expense, according to the report.

The loss ratio for the Florida market has increased 9.3 percent since last year (from 22.4 percent) and at 31.7 percent is roughly comparable to the peer group of states included in the report. The national average in 2009 for all states and territories is 36.5 percent – an increase from the 35.5 percent loss ratio in 2008. Of the 10 largest medical malpractice states, New York, Massachusetts, Pennsylvania, and New Jersey had loss ratios higher than the national average.

The loss ratios of the states with the most medical malpractice earned premium are:

• New York 62.0%
• Massachusetts 58.0%
• Pennsylvania 45.2%
• New Jersey 43.4%
• Illinois 36.2%
• Florida 31.7%
• Georgia 29.1%
• California 25.4%
• Texas 19.7%
• Ohio 18.6%

Insurance Commissioner Kevin McCarty said the report shows the marketplace continues to be strong, stable and competitive relative to other large states, “which is encouraging news for doctors and hospitals.”

The report shows that average approved rate in the primary medical malpractice market in 2009 (physicians and surgeons) was negative (10.8 percent).

Some specialized areas of medical malpractice did experience rate increases based on the 2009 rate filings: podiatrists, optometrists, chiropractors, and other specialized areas (+0.5 percent). Rate filings for dentists and professional nurses yielded a flat average of 0 percent. In total, there were 41 medical malpractice rate filings in 2009 in Florida.

Compared to other large states, Florida is the fifth largest market as measured by direct premium written and ranks sixth among the ten most populous states when measured by losses incurred to earned premium (31.7 percent).

Solvency risk does not appear to be a critical issue with these insurers, and they have shown favorable reserve development in 2009 for the fourth year in a row, reversing a previous trend of adverse reserve development.

Some findings from the closed claims data files:

• 3,087 claims were reported as closed during 2009; 1,577 for females, 1,510 for males.
• Hospital inpatient facilities, as in previous reports, were the most commonly reported claims location.
• Most claims were in the severe to moderate severity category.