Liability line should be profitable in 2006

Insurance companies agree the climate is becoming more predictable but say it's too early to judge if the tort environment will stay steady long term.

By Mike Norbut, AMNews staff. July 4, 2005.

The medical liability line of insurance appears ready to be profitable in 2006, according to a recent study, although physicians should not expect to see immediate premium reductions as a result.

The study, published by Hartford, Conn.-based Conning Research & Consulting Inc., lays out an argument for profitability based on a more predictable tort climate, improving investment prospects, and sustained insurance rates.

The study credits tort reform efforts, especially in those states declared to be in a medical liability crisis by the AMA, as having a significant effect on the steadying climate.

"While this may provide only short-term relief, it may form the basis for solving some of the longer-term issues" that are plaguing the tort system, according to the study.

Many publicly traded insurance companies tend to agree with the study's conclusion, saying that insurance rates were now adequate considering the current frequency and severity levels. Tort reform efforts have helped add some predictability to the system, said Frank O'Neil, a spokesman for ProAssurance Corp., a medical liability insurance company based in Birmingham, Ala.

However, because of the nature of the medical liability insurance industry, predicting a profit does not necessarily translate into a reduction in rates, he said.

Unlike car insurance companies, which generally can close the book on claims on an annual basis, liability insurance companies sometimes have to wait years before some claims are resolved.