LOS ANGELES (BestWire) – SCPIE Holdings Inc. said it was happy to get a 9.9% increase in its 2003 California medical-malpractice insurance rates, while a consumer advocacy group claimed victory because the insurer had sought more.
The second-largest medical-malpractice writer in the state, Los Angeles-based SCPIE said it plans to implement the rate increase in the fourth quarter of this year, pending appeals. The company provides health-care liability insurance for physicians, oral and maxillofacial surgeons, and other providers, as well as medical groups and health-care facilities.
SCPIE‘s annual rate filing, submitted to the California Department of Insurance in September 2002, requested a 15.6% rate increase for physician insureds in California, but this was challenged by the Foundation for Taxpayer & Consumer Rights, as allowed under Proposition 103, SCPIE said. Approval of the lower rate increase affects SCPIE‘s commitment to write business in California, according to Donald Zuk, SCPIE‘s president and chief executive officer.
“SCPIE has always exercised a leadership role in California medical professional liability insurance and will continue to do so,” Zuk said in a statement. “Although we remain firm in our
view that the requested rate increase was fully supported and justified, the commissioner’s decision will not lessen our commitment to California physicians and other health-care providers.”
The company intends to implement the approved rate, apply “strict but fair” underwriting standards to its existing insureds and new applicants for insurance, and continue its active claims handling and the aggressive defense of its insureds, Zuk said. In granting the approval, state Insurance Commissioner John Garamendi was upholding an administrative law judge’s decision after an eight-month process, SCPIE said.
The Foundation for Taxpayer & Consumer Rights heralded the commissioner’s decision as a tribute to the effectiveness of California’s insurance reform initiative known as Proposition 103, which the nonprofit organization said has held down medical malpractice and other insurers’ rates since the initiative was approved in 1988 by creating a “prior approval” regulatory system. It requires insurers to justify rates to the insurance commissioner and allows consumers to challenge rates they consider excessive.
In this case, SCPIE‘s 9,000 physicians stand to save $16 million in 2003 and another $7.2 million on next year’s premiums, the Foundation said. After beginning a turnaround strategy, SCPIE posted second-quarter net income of $612,000, or 7 cents a share, compared with a net loss of $12 million, or $1.29 a share, during the second quarter of 2002.
At the time, Zuk said it was progress, but the company still had a long way to go before returning to its previous profitability (BestWire, Aug. 7, 2003). The turnaround included exiting noncore businesses, and SCPIE now only writes new medical malpractice in California and Delaware.
According to 2002 state/line data from A.M. Best Co., Norcal Group had a 20.6% market share in California based on direct premiums written, followed by SCPIE Cos., with 16.1%; Doctors
Company Insurance Group, with 15.2%; Zurich/Farmers Group, with 7.3%; and American International Group, with 5%. SCPIE is the sixth-largest medical-malpractice writer in Delaware with a 6.9% market share, based on 2002 state/line data from A.M. Best Co. Allianz of America leads in Delaware with a 21.8% market share. SCPIE‘s stock was trading at $11.02 a share on the afternoon of Sept. 3, up 1.1% from the previous close. A.M. Best Co. gives SCPIE Cos. a financial strength rating of B+ (Very Good).
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