The Effects of Tort Reform on Medical Malpractice Insurers' Ultimate Losses
Florida State University - College of Business; Florida State University - College of Law; California State University, Northridge - Department of Finance, Real Estate, & Insurance
W. Kip Viscusi
Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics
University of Pennsylvania Law School
Journal of Risk and Insurance, 2009
Vanderbilt Law and Economics Research Paper No. 08-30
FSU College of Law, Law, Business & Economics Paper No. 09-26
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.
Number of Pages in PDF File: 36
Keywords: tort reform, medical malpractice, insurance, insurance losses, insurers' losses
JEL Classification: I10, K13, G22
Date posted: December 27, 2008 ; Last revised: October 16, 2009
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