Liability insurance rates steadying amid hopeful signs on tort reform

Doctors say a $250,000 noneconomic damages cap is still needed at the federal level.

By Amy Lynn Sorrel, AMNews staff. May 1, 2006.

After significant spikes in medical liability premiums in the past five years, some insurers in states with recent tort reforms are reporting no increases in premiums, and others are reporting reductions for physicians in 2006.

Overall, insurers say the stabilization is due to the continued decline in the number of medical liability lawsuits filed. Also, after years of raising rates to keep up with the severity of claims, they now have adjusted premiums to an adequate level to manage litigation costs and jury awards. In addition, insurers partially credit tort reforms for the moderation, but say it is too early to tell whether the efforts have taken root.

Insurance executives warn that high jury awards continue to plague the legal system, and they remain wary that the courts could undo the recently passed legislation that insurers and doctors say is needed to stabilize rates. While trial lawyers say the rate trend is due to the natural insurance cycle, doctors and insurers say more reforms are still crucial for most states to continue the trend of ameliorating high premiums.

"When states grab the bull by the horns and truly legislate meaningful reform, you will see a direct impact on the cost of doing business," said Corbette Doyle, National Healthcare Practice chair for Aon Corp., a nationwide insurance brokerage firm.

Until then, insurers are taking a "wait and see" approach as they slowly adjust rates in states that have passed reforms, she said.

In April, ISMIE Mutual Insurance Co. in Illinois cut its average premiums by 5.2% for 2006. Company executives said they were able to cut premiums mainly because of an 8% decrease in the number of claims filed in 2005.