Farmers Pulls Out of Malpractice Line

By Gary Mogel

NU Online News Service, Sept. 25, 3:30 p.m.EDT?

Especially hard-hit by Los Angeles-based Farmers' decision willbe Hawaii, where the carrier has about a quarter of the physicianmarket, and Missouri, where it has a little over 40 percent of thehospital market.

According to Farmers' spokesperson Mary Flynn, the company wrote$94.5 million in malpractice premiums in 2003, compared to $231million in 2002. "About 1,300 policies are currently in force," Ms.Flynn said.

Farmers lost $100 million on its malpractice business in 2002,and 2003 was following a similar loss trend, Ms. Flynn added.

Farmers, which wrote malpractice business through its TruckInsurance Exchange subsidiary, said in a statement that thedecision to exit this line was based on its strategy to focus onits core business lines of homeowners, auto, business and lifeinsurance.

"Medical malpractice accounts for less than one percent ofFarmers' total book of business," Ms. Flynn noted.

Farmers writes medical malpractice coverage in 18 states,including its home state of California, which accounts for about athird of the company's malpractice book, said Ms. Flynn. Farmers isa major malpractice writer in Hawaii, where it has 24 percent ofthe market. It also has over 10 percent of the medical malpracticemarket in Idaho and Oregon.

"In Missouri, Farmers writes malpractice for 41 percent of thehospitals and 6 percent of the physicians," said Missouri InsuranceDepartment spokesperson Randy McConnell.

Under Missouri law, Farmers has to give the Insurance Department90 days' notice before pulling out of a line of coverage, and mustgive 60 days' notice to each policyholder before non-renewing apolicy, Mr. McConnell pointed out. Due to these notice provisions,Farmers probably will not be able to non-renew policies until Marchof 2004, he added.

According to Mr. McConnell, the Missouri Hospital Plan, owned bythe Missouri Hospital Association, may provide coverage for some ofthe hospitals non-renewed by Farmers. "In addition, there are twophysician-owned carriers and several other insurers that couldprovide coverage to the non-renewed physicians," he said.

Joel Ario, insurance administrator for the Oregon InsuranceDivision, said that Farmers is a "major player" in insuring ruralhospitals in the state, although he did not have precise figures onthe company's market share.

Farmers is part of Schaumberg, Ill.-based Zurich North America.Zurich spokesperson Keith Owens said that he is not aware of anyplans by Zurich's specialty unit to exit any of its medicalmalpractice lines.

"Zurich now concentrates on writing malpractice for hospitals,clinics and large physician groups," Mr. Owens noted. "Two yearsago, we stopped writing individual physicians and small physiciangroups."