Rates

Rates

From a physician's point of view, the most contentious issue in malpractice insurance is rate setting. Physicians want affordable insurance; insurance companies want maximum income. Income is the product of the number of insureds and the premiums that each pays. As premiums increase, there are physicians who can no longer afford insurance. (Some of these leave practice, but the vast majority take a salaried job and continue to practice medicine.)

The important issue for the insurance company is not whether some physicians are now priced out of the market but whether the total dollars paid by the remaining insureds is higher at the new rate. Even if a company's nominal rates are temporarily higher than those of its competitors, the cost of tail coverage and contributions to reserves limit the ability of insureds to move to a competing insurer.

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