That Kentucky's four largest medical malpractice insurers are reaping windfall profits at the expense of Kentucky's doctors, hospitals and patients was shown by a recent examination of the profitability, performance and financial condition of these companies for the time period 2002 - 2006. The examination, which was conducted by Jay Angoff, the former Insurance Commissioner for the State of Missouri, analyzed the loss ratios, claims payments, reserves, surplus and dividend payments made during this period by Medical Protective Company (MedPro), State Volunteer Mutual Insurance Company (SVMIC), ProNational Corporation (ProNational), and American Physician's Assurance Corporation (APAC). The report was based on the annual statements these companies have filed with the Kentucky Department of Insurance and the National Association of Insurance Commissioners.
The study revealed the following notable conclusions: (1) SVMIC, ProNational and MedPro each had an incurred loss ration of less than 62%. An incurred loss ratio of 62 means that for each dollar an insurer brings in in premiums, it projects that it will ultimately pay out 62 cents in claims, thus leaving 38 cents of the premium dollar, as well as all investment income, available for expenses and profit. (2) MedPro, SVMIC, and ProNational each had a paid loss ratio of less than 31%. An insurer's paid loss ration measures and insures actual claims payments and is an indicator, not of an insurer's profitability, but rather its cash flow. Most notably, it was found that ProNational took in $71.4 million in premiums during the study period but paid out only $2.5 million in claims. (3) All four of the companies have paid out substantially less in claims than they initially estimated: ProNational's estimates were overstated 12.6%, MedPro's 14.4%, SVMIC's 23.0%, and APAC's 33.5%. (4) Because of their cash flow each of the companies were sitting on mountains of cash far exceeding the minimum surplus that the National Association of Insurance Commissioners require them to hold: ProNational's surplus was 385%, APAC's 509%, SVMIC's 618%, and MedPro's 897%. None of the companies had issued any dividends to the policy holders.
The Kentucky Insurance Commissioner is without authority to order refunds be paid to doctors who have paid excessive rates. Instead of pursuing this reasonable objective, the thrust of the Kentucky General Assembly these past few sessions has been to pursue legislation that would limit the amount that an insurance company would have to pay on the most egregious and harmful cases of medical malpractice.
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