Claims stabilizing for first time in years, study finds

Insurance claims against doctors, nurses and other medical professionals have stabilized for the first time in years, according to the seventh annual Aon Hospital Professional Liability and Physician Liability Benchmark Analysis, recently released by the insurance giant based in Chicago.

That encouraging news, however, comes with a downside: The average size of malpractice claims continues to rise.

The study, which measured 47,735 claims representing more than $4.4 billion of incurred losses in the United States, found that the overall frequency of medical malpractice claims has not increased for the second straight year. While claim frequency is stabilizing, according to the study, the average size (severity) of malpractice claims continues to increase at a rate of 6%. However, the average amount paid to indemnify claimants is increasing at a rate of only 3%, while amounts paid to defend against liability claims are growing at 17% as hospitals invest in claims management, explains Greg Larcher, director and actuary of Aon Risk Consultants and author of the analysis.

The improved frequency rate that first emerged in the 2005 study appears to be sustained through 2006," Larcher says. Based on study findings, we believe that the impact of past state level legislative reforms has largely been realized, and we do not expect significant decreases in claim frequency or severity resulting from tort reform in the future unless other states pass legislation that withstands challenges. Patient safety initiatives being implemented today, however, may be critical for sustaining a favorable frequency trend into the future."

Link: Mortality and claims frequency

This year's study found that a statistically significant relationship exists between mortality and claim frequency in certain segments of the database. For example, after adjusting for patient volume and acuity, Texas hospitals with 200 mortalities in 2004 experienced six indemnity claims while hospitals with 150 mortalities experienced four indemnity claims. This finding gives an interesting perspective on how changes in quality might affect claim counts, Larcher says. While it is logical to believe that organizations that reduce preventable harm to their patients will also reduce professional liability claim counts and costs, our study takes a first step at proving this true with data," he says. In the long term, the industry would benefit from a more comprehensive measure of quality, beyond mortality, that measures the success of patient safety improvements and their impact on liability costs."

More than 700 health care facilities provided loss and exposure data for the benchmark study. The analysis is co-sponsored by the American Society for Healthcare Risk Management (ASHRM) in Chicago. [Editor's note: The complete report is available for purchase from Aon. The cost is $250 for ASHRM members and $350 for nonmembers. To purchase a copy, call (800) 242-2626 and request item No. 178701, or go to for more information.]