Tort Reform and Healthcare Reform

It’s well-documented that tort reforms have had a positive impact in the medical malpractice environment by reducing the number of claims filed. An opinion piece in yesterday’s Washington Examiner by Texas Governor Rick Perry makes the case for why tort reform should be part of healthcare reform. Governor Perry describes the healthcare crisis that mired Texas back in 2003 when increasing litigiousness led doctors and their insurers to leave the state. He then describes how the Texas legislature turned the situation around by passing medical malpractice reforms – such as a $250,000 cap on non-economic damages – that protected the patient but also shielded doctors and hospitals from costly lawsuits. Earlier in June President Barack Obama told the annual meeting of the American Medical Association (AMA): “I’m not advocating caps on malpractice awards, which I personally believe can be unfair to people who’ve been wrongfully harmed, but I do think we need to explore a range of ideas about how to put patient safety first, how to let doctors focus on practicing medicine, how to encourage broader use of evidence-based guidelines.† Whether and how tort reform becomes part of healthcare reform remains unclear at this stage, but insurers have a stake in this debate. Check out I.I.I. information on medical malpractice.

Healthcare: U.S. vs. NHS

A question frequently asked of anyone who’s lived in the United Kingdom is how the healthcare system across the Pond compares to the one over here. Indeed the National Health Service (NHS) as it’s known in the United Kingdom has come under repeated attacks by critics of U.S. President Barack Obama’s health reform plans. So much so that this week U.K. Prime Minister Gordon Brown used Downing Street’s Twitter site to hit back at those critics who had dubbed the NHS “evil†. “NHS often makes the difference between pain and comfort, despair and hope, life and death. Thanks for always being there. #welovetheNHS,† Brown tweeted. As a result, #welovetheNHS has risen to the top of trending topics on Twitter. While the debate continues on healthcare reform the London Guardian’s Datablog yesterday answered the question of how the NHS compares to U.S. healthcare by posting a chart showing some key indicators on healthcare from countries in the G8 as well as Cuba and China, sourced from the World Health Organization (WHO). While it’s wise to remember that numbers tell a story but hardly ever the whole story, we note that among other things the chart indicates that U.S. per capita spending on healthcare is more than double that of the U.K. yet life expectancy in the U.S. is two years younger than across the Pond. Draw your own conclusions and check out I.I.I. facts and stats on health insurance.

H1N1 Headlines

Headlines abound on the impact of the H1N1 influenza virus, also known as swine flu. Over at the National Institute for Occupational Safety and Health (NIOSH) Science Blog, protecting healthcare workers is the topic of concern. It notes that healthcare workers and emergency responders will face increased risk of exposure to H1N1 given their role in caring for sick patients. Meanwhile, an August 11 Reuters article reports that with the onset of Asia’s monsoon season H1N1 is spreading in India, Thailand and Vietnam, according to the World Health Organization (WHO). It quotes WHO figures that as of August 6 some 177,457 cases of H1N1 pandemic flu had been reported worldwide, including 1,462 deaths. However, the article states that WHO believes the true number of infections is much higher. Meanwhile, an  August 12 Reuters article  reports that the family of an assistant principal who was New York City’s first swine flu victim has filed court papers with the intention of suing the city and its health and education departments. Earlier this week, hundreds of Americans in eight U.S. cities lined up to participate in H1N1 vaccine trials. A 2006 I.I.I. study by chief economist Dr. Steven Weisbart found that a moderate influenza outbreak, similar to those of 1957 and 1968 could cost life insurers an estimated $31 billion. A severe pandemic, like the 1918 influenza outbreak, could cost insurers up to $133 billion.

Captive Insurance Gathering

This week marks the Vermont Captive Insurance Association’s 24th Annual Conference where the economic downturn is likely to be the focus of discussions. Recent research from ratings agency A.M. Best noted that U.S. captive insurers’ net income declined by around 66 percent in 2008 for a composite of 186 captive companies. This reflects realized losses of $1.2 billion for the year, a large percentage of which resulted from one company’s investment losses. On the bright side, net underwriting income actually increased over the prior year – evidence of the captive industry’s typical underwriting discipline and its inclination not to rely on investment income, according to A.M. Best. Captive formations continue amid a softening commercial insurance market, but new captive domiciles are finding it challenging to establish a presence. A.M. Best reports that the outlook for the captive industry is stable as participants exercise their financial flexibility in a softening market. Check out I.I.I. information on captive and other risk financing options.

Tokyo Earthquake Risk

A magnitude 7.1 earthquake struck some 320 km (200 miles) south-southwest of Tokyo on Sunday, according to the U.S. Geological Survey (USGS), with an offshore epicenter some 303 km (188 miles) deep. The Japan Meteorological Agency put the magnitude of the earthquake slightly less, at 6.9. The quake apparently halted trains and a baseball game, but there were no immediate reports of damage or injuries. Japan lies in one of the most seismically active areas of the world. Research by catastrophe modeler RMS indicates that a repeat of the 1923 magnitude 7.9 Great Kanto earthquake would cause approximately $80 billion in insured property losses. The magnitude 7.2 Great Hanshin (Kobe) earthquake of 1995 was one of the worst in Japan’s history and ranks among the top 40 worst global catastrophes between 1970 and 2008 both in terms of victims and insured losses. Some 6,425 people died in the quake which caused $3.5 billion (indexed to 2008 dollars) in insured losses, according to Swiss Re. Check out I.I.I. earthquake facts and stats.

Hurricane Season Update

As Hawaii prepares for the approach of Hurricane Felicia, the sixth named storm of the Eastern Pacific hurricane season (Note: Eastern Pacific hurricanes rarely hit the U.S.), forecasters this week downgraded their forecasts for Atlantic hurricane season activity. Not that this is a guarantee of quiet times ahead. The National Oceanic and Atmospheric Administration (NOAA) warned the public not to let its guard down, even as it changed its Atlantic  hurricane outlook to an increased probability of a below-normal season and an expectation of fewer named storms and hurricanes. NOAA forecasters say there is now a 70 percent chance of seven to 11 named storms, of which three to six could become hurricanes, including one to two major hurricanes (Category 3 or higher). Meanwhile, Colorado State University’s Tropical Meteorology Project team has also downgraded its forecast and said the probability of a major hurricane making landfall along the U.S. coastline this year is 46 percent, compared with the last-century average of 52 percent. The team now predicts there will be 10 named storms, of which four will become hurricanes, including two major hurricanes. Check out I.I.I. hurricane facts and stats.

Losses Impact Aviation Rates

Airline insurance programs saw an average premium increase of more than 20 percent in July bringing the average increase for the year so far to 17 percent, according to Aon’s August 2009 Airline Insurance Market News. That said, Aon notes that the average is somewhat inflated by the renewal of a U.S. program that had a fatal loss earlier in the year. Without that, the average increase in lead hull and liability premium would only be 14 percent so far this year. Irrespective of the specifics, the current conditions are clearly a significant turnaround compared to 2006 and 2007, when prices in the airline insurance markets declined by more than 10 percent each year. Despite only one major loss since June, 2009 still looks set to be very expensive from a claims point of view, according to Aon. Overall losses (including minor losses) have cost aviation insurers $1.66 billion so far in 2009, compared to $798 million in 2008. Check out I.I.I. aviation facts and stats.

Move to Overturn Stoneridge

U.S. Senator Arlen Specter has introduced a bill (S. 1551) that would overturn the U.S. Supreme Court’s decision in Stoneridge Investment Partners v. Scientific-Atlanta, Inc. The bill would allow shareholders to sue individuals or firms that provide substantial assistance in a fraud. Following the 2008 Supreme Court decision shareholders have been barred from suing third parties (such as accountants and lawyers) charged with aiding a corporation that has defrauded its investors. In a press release responding to the development, Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform noted that the legislation would overturn the Supreme Court precedent in the Stoneridge case and benefit securities class action plaintiffs’ lawyers at the expense of average investors and workers. The move underscores the point that determinations of the Supreme Court are not always final. In many cases the Court’s opinions can be reversed by legislation passed by Congress. For more on this, check out the I.I.I. white paper The Tort Threat.

Mid-Atlantic Hurricane Overdue

The East Coast of the United States, and especially the Middle Atlantic states, remains overdue for a major (Category 3 or stronger) hurricane strike, according to the author of a book on the topic. This year marks the 40th anniversary of Hurricane Camille, the deadliest storm in Virginia’s history, and despite the absence of major storms in recent years, the Middle Atlantic region can only beat the odds for so long says Rick Schwartz, author of the book Hurricanes and the Middle Atlantic States. “Hurricane history suggests that the Mid-Atlantic’s seeming immunity will change as soon as 2009. Hurricane Alley shifts. A modest drift to the east of the Gulf Coast activity would likely send hurricanes storming up the Eastern seaboard.† Hurricane Isabel was the last Category 2 hurricane to make landfall along the U.S. East Coast north of Florida, while the last Category 3 was Hurricane Fran in 1996. Hurricane Hugo in 1989 (the seventh most costly hurricane in U.S. history)  was the last Category 4 storm. In comparison, 10 Category 2 or stronger storms made landfall along the Gulf Coast between 2004 and 2008. Check out I.I.I. hurricane facts and stats.

H is for Health Care Reform

First week in August and with no hurricane in sight, it’s interesting to note that the insurance industry is still making the summer headlines but right now in the arena of health care reform. We have a couple of points to make. An article in the New York Times today tells us that Congressional Democrats and leading advocacy groups are laying the groundwork for “an August offensive against the insurance industry† as part of a campaign to sell the public on the need for health care reform. Tip: for every article and headline on health care reform, please read “health insurance† for “insurance.† It’s important to recognize that there are three key insurance sectors. Property/casualty (P/C) insurance consists mainly of auto, home and commercial insurance while life/health (L/H) consists mainly of life insurance and annuity products. The third sector, health insurance, is offered by private health insurance companies, as well as by some L/H and P/C insurers. Total health insurance from the three sectors totaled $493 billion in direct premiums written in 2007, including $331 billion from health insurers, $155 billion from L/H insurers and $7 billion from P/C insurers, according to the I.I.I. 2009 Insurance Fact Book. This brings us to the next point. The P/C insurance industry plays an important economic role in contributing to the health care industry. Claims filed under auto, workers compensation and liability insurance policies all have a health care cost component and the health care industry is a prime recipient of these claims. As a result the P/C insurance is one of many industry sectors that will be potentially affected by changes in the nation’s health care system. While it’s too soon to know what that impact will be, it’s clear that health care reform is an emerging issue with direct and indirect consequences for P/C insurers, among others. Check out I.I.I. facts and stats on health insurance.