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Claims-Made and Reported Policies and Insurer Profitability in Medical Malpractice

  • Patricia Born
  • M. Martin Boyer

The liability crisis of the 1970s led to the introduction of a new type of insurance policy designed, according to Doherty (1991), to reduce the un-diversifiable uncertainty associated with writing long-tail liability lines. These new claims-made and reported policies gained favor in place of the traditional occurrence coverage in the early eighties not only in medical malpractice, but also in the general liability arena. Under occurrence coverage, a loss incurred in a given year is covered by the contract for that year, regardless of when the claim is reported. In contrast, a claims-made policy pays only the claims reported in the policy year. Our paper presents a structure, conduct, and performance analysis à la Joskow (1973) of the medical malpractice insurance industry by focusing on the differences between the two contracts. The main question we want to address is why there are two types of contracts that cover the same risk exposure in the medical malpractice insurance industry whereas in other lines of insurance, only one exists primarily. La crise de la responsabilité civile des années 70 a mené à la création d'un nouveau type de contrat d'assurance qui avait pour but, selon Doherty (1991), de réduire le risque systématique associé aux polices d'assurance à longue durée. Ces contrats CMR (Claims-Made and Reported) ont obtenu la faveur du public dans les années 80 particulièrement pour ce qui est de l'assurance de la responsabilité civile des professionnels de la médecine. Nous présentons ainsi une étude de la structure et de la performance de l'industrie de l'assurance de la responsabilité civile des professionnels de la médecine en mettant en relief les deux types de contrats dans ce marché. La question à laquelle nous voudrions ultimement répondre est la suivante : pourquoi dans le marché de l'assurance de la responsabilité civile des professionnels de la médecine retrouvons-nous les deux types de contrats alors qu'un seul type est généralement offert dans les autres marchés?

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2008s-13.

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Length: 41 pages
Date of creation: 01 May 2008
Date of revision:
Handle: RePEc:cir:cirwor:2008s-13
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  8. Allen N. Berger & J. David Cummins & Mary A. Weiss, 1995. "The Coexistence of Multiple Distributions Systems for Financial Services: The Case of Property-Liability Insurance," Center for Financial Institutions Working Papers 95-13, Wharton School Center for Financial Institutions, University of Pennsylvania.
  9. Joong, K.W. & mayers, D. & Smith, C.V., 1996. "On the Choice of Insurance Distribution Systems," The A. Gary Anderson Graduate School of Management 96-15, The A. Gary Anderson Graduate School of Management. University of California Riverside.
  10. Manishi Prasad & Peter Wahlqvist & Rich Shikiar & Ya-Chen Tina Shih, 2004. "A," PharmacoEconomics, Springer Healthcare | Adis, vol. 22(4), pages 225-244.
  11. Richard D. Phillips & J. David Cummins & Franklin Allen, 1996. "Financial Pricing of Insurance in the Multiple Line Insurance Company," Center for Financial Institutions Working Papers 96-09, Wharton School Center for Financial Institutions, University of Pennsylvania.
  12. 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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