The Effects of Tort Reform on Medical Malpractice Insurers' Ultimate Losses
AbstractWhereas the literature evaluating the effect of tort reforms has focused on the impact of reforms on insurers' reported incurred losses, this article examines the ultimate effects of reforms using the developed losses from a comprehensive sample of insurers writing medical malpractice insurance from 1984 to 2003. Noneconomic damages caps are particularly influential in reducing medical malpractice losses and increasing insurer profitability. The long-run effects of these reforms are greater than insurers' expected effects; for example, 5- and 7-year developed loss ratios are below the initially reported incurred loss ratios for those years following the enactment of noneconomic damages caps. Analyses of reported losses consequently understate the ultimate effects of tort reforms. The quantile regressions show that reforms have the greatest effects for the firms that are at the high end of the loss distribution. Copyright (c) The Journal of Risk and Insurance, 2009.
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Bibliographic InfoArticle provided by The American Risk and Insurance Association in its journal Journal of Risk and Insurance.
Volume (Year): 76 (2009)
Issue (Month): 1 ()
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Web page: http://www.wiley.com/bw/journal.asp?ref=0022-4367&site=1
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Other versions of this item:
- Patricia Born & W. Kip Viscusi & Tom Baker, 2006. "The Effects of Tort Reform on Medical Malpractice Insurers' Ultimate Losses," NBER Working Papers 12086, National Bureau of Economic Research, Inc.
- K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
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- Danzon, Patricia, 1984. "The Frequency and Severity of Medical Malpractice Claims," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 115-48, April.
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- Viscusi, W Kip & Born, Patricia, 1995. "Medical Malpractice Insurance in the Wake of Liability Reform," The Journal of Legal Studies, University of Chicago Press, vol. 24(2), pages 463-90, June.
- Koenker, Roger & Bassett, Gilbert, Jr, 1982. "Robust Tests for Heteroscedasticity Based on Regression Quantiles," Econometrica, Econometric Society, vol. 50(1), pages 43-61, January.
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