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Malpractice Premiums Jump

Lawyer carries papers in file folder and a Caduceus over a doctor
AP / CBS
Medical malpractice insurance rates rose dramatically during the past five years, but the amount insurers paid out in claims did not, according to a study from a consumer advocacy group.

The study, released Thursday by the Center for Justice & Democracy, found that malpractice rates increased by 120 percent from 2000 through 2004, while the amount of money paid in claims went up by 5.7 percent.

"This is wacky," said Jay Angoff, a former insurance commissioner in Missouri and the primary author of the study. "Now what's the insurance companies' defense to this?"

Researchers looked at annual statements filed with state insurance departments by the nation's 15 largest medical malpractice insurers.

The report also found that the leading insurers increased their surpluses — the money they have after setting aside what they will need to pay claims in the future — by a third.

"The extra cherry on top for the industry, and the extra knife in the gut for doctors, is not only did claims payments go down ... the companies also added to their surpluses," Angoff said.

Insurers were critical of the study's methodology, saying that it only considered the amount paid out to plaintiffs. Larry Smarr, president of the Maryland-based Physician Insurers Association of America, said if other costs — such as money paid to defend claims had been included, the report would have painted a much different picture of the companies' finances.

Because it takes time for claims to materialize and be paid, companies must collect premiums based on future cost expectations, he said.