The Effects of Tort Reform on Medical Malpractice Insurers' Ultimate Losses

Abstract:     
Whereas the literature evaluating the effect of tort reforms has focused on insurers' reported incurred losses, this paper examines the long run effects of reforms using the developed losses from a comprehensive sample of insurers writing medical malpractice insurance from 1984-2003. The long run effects of reforms are greater than insurers' expected effects, as five year developed losses and ten year developed losses are below the initially reported incurred losses for those years following reform measures. The quantile regressions show that reforms have the greatest effects for the firms that are at the high end of the loss distribution. The beneficial effects of reforms on developed losses are more pronounced than those obtained from initially-reported losses, suggesting that insurers underestimated the true effects of the reforms.

Keywords: tort reform, medical malpractice, insurance, insurance losses, insurers' losses

JEL Classifications: I10, K13, G22

Accepted Paper Series