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January 19, 2005
At the Becker-Posner Blog, this week's topic is liability reform (Posner first, then Becker). Without seeking to respond to all of their views, some of which come across as persuasive and others as highly idiosyncratic, it is noteworthy that in Posner's second paragraph he asserts flatly that "malpractice insurance is not experience-rated -- physicians are not charged premiums based on their personal liability experience". The implication is that a physician who has faced several claims will pay no higher premium than one in the same specialty and locality who has never faced a claim, which will strike many readers as a curious and perhaps regrettable state of affairs if true.
But is it in fact true? The Michigan Medical Malpractice blogger begs to differ:
[P]rofessional liability insurers already do in fact use claims experience as a basis to set rates. A physician with one or two verdicts or settlements will pay more in premiums than a physician who has never been sued. Some companies will cancel policies for those with five, or three, or sometimes even one. Indeed, it is an unfortunate reality that many companies will jack up premiums for a physician who simply has a pending claim against him, regardless of whether it has merit or not.
More: Lots more on this issue -- including scraps of evidence pointing in puzzlingly contradictory directions -- from Martin Grace (Jan. 19 and Jan. 20, citing this board), and in Posner's own comment section. Peter Nordberg also comments. This 1994 Wharton paper by Patricia Danzon calls experience rating in malpractice insurance "very crude, both because insurers lack the necessary information and possibly because of political pressures." Yet more: Martin Grace, Feb. 23.
Posted by Walter Olson at 11:13 AM
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