|
|
|
Medical Malpractice Crisis Appears to Have Created Opportunities for New Onshore Domiciles Including South Carolina
The insurance industry claims that runaway malpractice verdicts have caused skyrocketing premium and companies like Saint Paul Insurance to stop writing malpractice insurance in Pennsylvania altogether. It is my understanding that St. Paul was the last available choice for many hospital and physicians in Pennsylvania. What is surprising is that there has been created a malpractice insurance availability crisis in states like Pennsylvania yet there has been a rush of alternative providers willing to fill the need for insurance. Some of these new providers are the Pennsylvania hospitals and physicians groups themselves or in some cases their insurance brokers and/or defense attorneys. Recently President Bush selected Scranton, Pennsylvania to announce his federal plan to cap malpractices damage awards at $250,000. Prior to this announcement more than fifteen groups had formed risk retention groups to offer products in Pennsylvania and several of these worked with South Carolina for on shore approval of their risk retention group. President Bush placed the blame for the malpractice crises on runaway verdicts and trial lawyers. However one has to consider, as all of these newly formed groups have, that there may be opportunities to not only solve the crisis but also to create a profitable risk-sharing vehicle. Add to this the definite possibility of legislative relief from excessive verdicts at the state and even the federal level and there appears to be, as there always does in a time of crises, an opportunity being presented. Over the past ten years the Cayman Islands as an offshore domicile has created a reputation as a leader for the establishment of medical malpractice alternative solutions primarily through rent- a- captive facilities. It is significant that these new groups have elected not only to place their facilities onshore but also to chose a group owned risk retention group – a captive rather than a rent a captive. The experience of these new provider groups in onshore domiciles like South Carolina of quick but thorough regulatory response is very noteworthy and indicates that a new onshore domicile can compete very favorably with an offshore domicile even where that offshore jurisdiction holds a leadership position. It foretells well for the future of domiciles like South Carolina. In order to understand why these new groups are rushing into potentially dangerous territory where ostensibly no traditional insurer would tread it is necessary to consider some of the statistics and information gathered by various interest groups over the years. Granted it is easy to lay the fault on the trial lawyers but as a lawyer I have tried a few cases and at least based on my observations and those of other lawyers , jury verdicts are harder to come by for the plaintiff’s bar and have been substantially reduced in recent years. Yes, there are those ridiculous multi- million verdicts that make their way into everyone’s morning newspaper that are usually reduced substantially on appeal but overall we are living in a more conservative judicial environment when it comes to calculating plaintiff’s awards or even deciding to make an award to a plaintiff. There are those who claim that the increase in malpractice insurance premiums can be laid at the feet of lower investment returns on the part of insurance companies rather than runaway verdicts .The Americans for Insurance Reform, a coalition of nearly 100 consumer groups around the country, has produced a thorough and comprehensive study of medical malpractice insurance examining what insurers have taken in and paid out over the past thirty years and offers some fairly convincing statistics to demonstrate that there has been no explosion in medical malpractice payouts during the last thirty years but rather payments instead have been extremely stable and virtually flat since the mid- 1980s. This group concluded that insurance premiums for medical malpractice coverage increase or decrease in direct proportion to the strength or weakness of the economy. This study traces the hard market in malpractice insurance to the lack of investment returned brought about because of the economy and not to malpractice jury awards. Obviously, if this were true then our present weak economy would easily cause an increase in malpractice premiums. A relevant question is, however, if there is still money to be made, why have companies like St. Paul virtually abandoned a market as large as Pennsylvania? On close examination the Pennsylvania situation has demonstrated that most large malpractice verdicts occur in select large metropolitan areas and the verdicts are attributable to the actions of a small number of physicians some of whom tend to be repeat offenders. The new underwriters soundly believe that these loss characteristics are susceptible to possible elimination through the exercise of sound underwriting. The opportunities for the newcomers to this field are obvious because there is first of all, a crisis to be solved but in addition there is also the possibility for profits to be made. Some of the tools that these newcomers intend to use are soundly based in traditional insurance underwriting and claims practices, which all essentially boil down to control of your book of business. For example by operating through affinity groups where the administrators and the insured know each other, adverse selection can be virtually eliminated. Strict attention to loss experience and good actuarial support, which must pass muster with the state regulators, assures these operatives that pricing for the product is adequate. Hands on participation of the insured themselves in their risk retention group provide safeguards that are not available in the traditional market. Stability is assured through the continued existence of the group and solid reinsurance programs, which these groups are finding, are not as unavailable as originally thought. Relief though legislation at the state and federal level is apparently almost guaranteed in some form or another. Administration and costs of producing (commission) savings are reasonable and are able to be passed on to the members in the form of premium savings. Claims handling is established that is responsive and geared towards the avoidance of ultimate jury determination except where a defendant’s verdict is virtually assured. These are only a few of the reasons why these groups appear to be headed towards ultimate success. We have been especially impressed by the commitment and organization of the groups that we have had the opportunity to serve here in South Carolina and have been deeply impressed by the South Carolina insurance department’s ability to respond and to offer flexibility to these groups many of whom truly had no alternative available because of the trational insurers leaving the market in some areas. If you are involved in solving a medical malpractice insurance crisis for your group, we would welcome the opportunity to speak with you about the advantages of South Carolina.
Web site: CharlestonCaptive.com |
| http://www.captive.com/newsstand/CharlestonCaptiveMgt/MedicalMalpractice.html | |