State's Largest Insurer More Profitable Than Ever
Santa Monica, CA -- Physicians Insurance, Washington state's largest medical malpractice insurer, announced a 7.7% decrease in physicians' rates for 2005 and higher profits than the company has seen in a decade, despite the fact that the state has not passed the malpractice cap insurance companies and doctors insist is necessary to address rising premiums.
"The premium decrease by Washington's largest malpractice insurer exposes yet another insurance company lie about the source of rising malpractice rates: damage caps do not lower doctors' premiums because premiums move with economic cycles, not jury verdicts. Record profits prove that Physicians Insurance manufactured a crisis by overcharging doctors," said Carmen Balber, consumer advocate with Foundation for Taxpayer and Consumer Rights (FTCR).
As reported by the Seattle Times, Physicians Insurance net income through the third quarter of 2004 was over $10 million -- more than three times its $2.8 million net income of 1996 and a record profit for the company.
Insurance premiums in Washington, and the nation, follow the insurance cycle in a boom-bust financial pattern: Insurance companies raise rates when investment income is low, then lower rates as the market improves and they want to increase the number of policyholders so more premium dollars are available to invest.
California mitigated premium instability caused by the insurance cycle with Proposition 103, the insurance reform initiative that requires prior approval of insurance rate increases and decreases.
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"As the insurance cycle continues its downward course, insurers in other states will begin to follow Washington and lower rates as well. However, strong rate regulation is the only way to temper the up and down swings of the insurance cycle permanently," said Balber.
The nation's largest medical malpractice insurer, GE Medical Protective, told Texas regulators in October that damage caps and other limits on recovery for injured patients do not have a significant impact on malpractice premiums.
The rate decrease by Physicians Insurance is more proof that insurance companies have misrepresented the cause of rising premiums, said FTCR.
In Washington, data reveal that the number of doctors in the state increased 24% between 1993 and 2003. Furthermore, the value of malpractice payouts in 2001 was 25% lower than the inflation-adjusted value in 1997, and the number of payouts per year declined from 1993 and 2001, according to a Public Citizen report.
"Despite mounting evidence that Washington was experiencing a 'crisis' of insurer greed and nothing more, insurance companies and doctors continue to push a damage cap on the public, this time in the form of Initiative 330. The Physicians Insurance rate decrease shows that premiums can be lowered without taking away patient rights," said Balber.
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