A California-based consumer group has called for an investigation of accounting practices that it believes have inflated medical malpractice losses in the interest of charging higher premiums.
The Santa Monica-based Foundation For Taxpayers and Consumer Rights said in a report that the "incurred losses" that medical malpractice insurance companies initially reported for policies in effect in each of the years examined were, on average, 46 percent higher than the amount the insurers actually paid on losses.
"If historical loss inflation is any indicator of current trends, insurance companies overstated loss projections by $15 billion between 1995 and 2003," the report said.
The study charged that many insurers have falsely characterized loss data in statements to lawmakers, news media and the public, and cautions "lawmakers and regulators should not rely on the insurance industry's current loss projections because those figures are not based on hard or otherwise reliable data."
For the past several years federal and state lawmakers have considered tort reform measures that would cap noneconomic damages in medical malpractice suits.
The insurance industry denounced the report's findings.
Lawrence Smarr, president of the Physicians Insurers Association of America said the FTCR report is "ancient history and bears no relevance to what has happened in recent years, where we see incurred amounts increasing over time."
Mr. Smarr said that A.M. Best has reported that actual payments from 1998 to 1999 already exceeded initial incurred values.
"The FTCR report uses selective annual data to prove its points and fails to indicate that doctors received significant payments and benefited from stable premiums during most of these years," he said.
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