Study: Malpractice insurers inflated losses to raise rates

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The Post-Standard (Syracuse, New York)

Medical malpractice insurance companies consistently inflated the amount they estimated they would pay out in claims between 1986 and 1994, then used the inflated figures to justify enormous increases in doctors’ premiums, according to a study by the nonprofit Foundation for Taxpayer and Consumer Rights.

Insurers reported $39 billion in losses to regulators during this time period, but paid out only $27 billion in claims. The group called for an investigation of industry accounting practices it said enable insurance companies to misrepresent their financial conditions.

The study said inflation of insurers’ losses, as reported in the annual statements submitted to regulators, is even greater in periodic economic downturns when insurance companies need to raise premiums to offset falling investment income.
James T. Mulder’s health care notebook appears each week in MoneyWise.

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