Decreases in investment income, coupled with increases in the severity of lawsuits and the rising costs of reinsurance, are likely to make medical malpractice a difficult market in the near future, according to Conning & Company. The study, “Medical Malpractice Insurance: A Prescription for Chaos,” revealed that in 1999 the medical malpractice line of insurance ended a 12-year streak of outperforming the p/c industry as a whole. This coincided with insurer reserve deficiencies growing to $1.7 billion, leaving insurers little margin for any negative surprises in 2001. The difficulty is due in part to disproportionate claims against nursing homes, although hospitals also contributed. The loss ratio of the nursing home line was approximately 300 per- cent in 1999, an extreme number that accounted for much of the entire medical malpractice industry’s disappointing combined ratio of 129.5 percent. The Conning study also focuses on the forces that will most likely define the changing medical malpractice market: reinsurance affordability, government regulation, and the increased use of the Internet by consumers, providers and insurers.
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