According to the 2011 annual report on medical-malpractice risk from the Florida Office of Insurance Regulation (OIR), medical-malpractice insurers saw their seventh consecutive year of profitability in 2010.

The study shows that the average countrywide return on surplus for Florida's leading medical-malpractice writers was 12.2 percent in 2010, up from of 6.6 percent in 2009.

In an attempt to put those percentages in perspective, OIR notes that the return on surplus is a national number that takes into account profitability in states other than Florida, and it also may be affected by changes in loss reserve adequacy. The 12.2 percent for 2010 also includes the profitability of other lines of insurance for multi-line writers. When the return on surplus is calculated only for those leading companies writing medical-malpractice in Florida, the return was 9.5 percent.

Florida's medical-malpractice market has enjoyed relative stability since lawmakers enacted reform legislation (SB 2-D) in 2003 that included caps on non-economic damages and changes to bad faith allegation requirements. The law also prohibited any medical-malpractice insurance rate changes from July 1, 2003 to Jan. 1, 2004, and required insurers to file new rates within 60 days of the OIR's publication of the “presumed factor” reflecting the anticipated savings of the reforms.

OIR notes in its 2011 annual report that “ … it would appear that the 2003 changes to the law have benefited policyholders and the industry, assisted with the solvency of medical malpractice carriers, and directly contributed to lowering the defense cost and containment ratios in Florida.”

By statute, the OIR must use three specific data resources in developing its annual report: The National Association of Insurance Commissioners (NAIC) annual financial statement filings; the closed claims database maintained by the OIR; and an analysis of rate filings filed with the OIR during the previous year.

Using those resources to gather information about the 23 firms comprising 80 percent of the Florida market, the study found that:

Although many (if not a majority) of companies specialize in medical malpractice insurance, this is usually not the only line of business written by the insurers.
Florida is usually one of their top five premium markets.
Their loss and expense ratios in Florida, while varied across companies, are often among the lower loss ratios for each of the company's top five premium states.
The premium weighted effective average return on surplus was 12.2 percent in 2010, up from 6.6 percent in 2009, also up from 9.5 percent in 2008 and 11.0 percent in 2007.
Solvency risk does not appear to be a critical issue with these sample companies. The companies have shown favorable reserve development for the fifth year in a row, reversing a previous trend of adverse reserve development.

The OIR reports that in 2010 it processed 61 medical-malpractice rate filings that generated rate changes or a validation of rates. On average, physicians and surgeons rates for companies writing in the admitted market decreased approximately 2.3 percent. Increases were seen in other specialties: Dentists' rates increased 4.0 percent; professional nurses' rates climbed 11.4 percent; and rates for podiatrists, optometrists, chiropractors and similar professionals rose 2.3 percent.

The data on closed claims shows:

2,520 claims were reported as closed during 2010 (down from 3,087 in 2009); 1,252 claims were closed for females, 1,268 for males.
Hospital inpatient facilities were the most commonly reported claims location.
Most claims were in the “severe to moderate” category.
An estimated $766.6 million (4 percent above 2009) was paid over the lifetime of the claims closed in 2010; $594.4 million was paid in damages, the remainder in loss adjustment expenses.

The report also contains information and charts comparing Florida with other states in the top ten for most medical malpractice premium earned in the admitted market: New York, California, Pennsylvania, Illinois, New Jersey, Ohio, Texas, Massachusetts and Georgia.

Additional data compares Florida with other states in the top ten for most medical malpractice direct losses incurred: New York, Pennsylvania, New Jersey, California, Illinois, Massachusetts, Maryland, Georgia and Washington.

When Florida is compared to other large states, it is the fifth largest market as measured by direct premium written. It ranks eighth among the ten most populous states when measured by losses incurred to earned premium ratio (25.3 percent).

Special Reports /

Florida OIR Report on Med-Mal Shows Profitable 2010

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