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 will be Hawaii, where the carrier has about a quarter of the physician market, and Missouri, where it has a little over 40 percent of the hospital market.

According to Farmers' spokesperson Mary Flynn, the company wrote $94.5 million in malpractice premiums in 2003, compared to $231 million 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 Truck Insurance Exchange subsidiary, said in a statement that the decision to exit this line was based on its strategy to focus on its core business lines of homeowners, auto, business and life insurance.

"Medical malpractice accounts for less than one percent of Farmers' 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 a third of the company's malpractice book, said Ms. Flynn. Farmers is a major malpractice writer in Hawaii, where it has 24 percent of the market. It also has over 10 percent of the medical malpractice market in Idaho and Oregon.

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

Under Missouri law, Farmers has to give the Insurance Department 90 days' notice before pulling out of a line of coverage, and must give 60 days' notice to each policyholder before non-renewing a policy, Mr. McConnell pointed out. Due to these notice provisions, Farmers probably will not be able to non-renew policies until March of 2004, he added.

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

Joel Ario, insurance administrator for the Oregon Insurance Division, said that Farmers is a "major player" in insuring rural hospitals in the state, although he did not have precise figures on the 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 any plans by Zurich's specialty unit to exit any of its medical malpractice lines.

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

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Farmers Pulls Out of Malpractice Line

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