For example, in the letter from Sarah White, property-casualty property manager for the Alliance of American Insurers, the writer agrees that med mal paid claims have risen at the cost of inflation. The writer goes on to say that Jury Verdict Research data proves that there is a “meteoric rise in medical malpractice claims costs.”

But unlike the claims data that I analyze, which includes everything from million-dollar verdicts to claims closed without payment, the JVR data are very incomplete and unreliable. Heres what The Wall Street Journal said about Jury Verdict Research in its June 24, 2002, edition:

“Jury Verdict Research says its 2,951-case malpractice database has large gaps. It collects award information unsystematically, and it can't say how many cases it missesmore important, the database excludes trial victories by doctors and hospitals–verdicts that are worth zero dollars. Thats a lot to ignore. Doctors and hospitals win about 62 percent of the time, Jury Verdict Research says. A separate database on settlements is less comprehensive. A spokesman for Jury Verdict Research, Gary Bagin, confirms these and other holes in its statistics.”

As to the page 12 article, “Hunter Fires Blanks with Smoking Gun,'” by Raymond R. Mazzotta, president and chief operating officer of OHIC Insurance Company–once you strip away the hot rhetoric, there is nothing of substance left. The writer misconstrues my research to say that rates are “right where they should be,” and that that is inconsistent with concerns about price gouging.

The truth is that rates have clearly become excessive in the tight phase of the market, just as they are inadequate in the soft phase. The claim that “it doesnt seem to bother Mr. Hunter that rates are at their current levelsHes just unhappy that they climbed so quickly,” is silly, as I would not have written the piece if I thought rates were not going above proper levels in the current non-competitive phase of the cycle.

The writer of the page 10 article, “Actuary Counters Hunter on Med Mal Insurance Crisis”–Robert F. Wolf, a principal and consulting actuary for Mercer Consulting–is, unlike the others, thoughtful, and does not foam at the mouth. The writer does fall into the Jury Verdict Research trap, though, ignoring the severe problems with JVR data.

Like the others, he does not dispute the validity of the data. Instead, he creates a new chart reflecting my conclusion that claims have risen about as fast as medical inflation, but indicates that certain types of malpractice claims increase faster than the rate of inflation. To which I respond, “So what?”

It is true that my analysis doesnt reflect “rate differentials by specialty.” Such data are not available. However, the point is that, in the aggregate, paid claims are down over the last decade, and therefore there is no overall explosion in claims causing the current crisis. If claims for a particular specialty are different, rising faster than average, then other specialties would have to be down more than average.

Finally, as to the contention that it is competition (low barriers to entry), not bad underwriting practices, that drives the cycle, there is some truth to that. However, it is during the soft market that mismanagement occurs when premiums swing far out of line with costs.

At that point, it is inevitable that a crisis will occur. Later, the pendulum swings the other way–to unconscionable overpricing. This is why Julian James, director of worldwide markets for Lloyd's of London, has called upon the industry to end its poor operating practices (see “Lloyd's Calls For An End To Insurance Cycle Mentality,” NU, Nov. 4, page 5).

Given that all three reviewers did not dispute the underlying validity of the data and analysis I presented, it is clear that the doctors of America should be focusing on insurance reform, rather than tort reform, to eliminate the periodic and severe insurance price spikes with which they must cope.

Doctors surely must recognize that the price jumps are directly tied to the cycle (unless they think that those dastardly lawyers are so clever as to time their lawsuit explosions to coincide precisely with the bottom of the insurance cycle). The fact that paid med mal insurance losses have been flat over the last three decades proves that these periodic claim explosions do not exist. Only a blind–or biased–reviewer could conclude otherwise.

J. Robert Hunter
Director Of Insurance
Consumer Federation of America
Washington, D.C.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.