In Their Own Words …

The American Medical Association
on Medical Malpractice

In a report by the American Medical Association’s Board of Trustees to its House of Delegates, the following words were written linking rising premiums to the insurance underwriting cycle:

"The insurance underwriting cycle is now at a point where insurers have both pricing power and a need to increase revenues through premiums as returns on investments are no longer able to subsidize underwriting loses [sic] and as insurers have suffered large claims losses in other areas." (Page 2)

"For several years, insurers kept prices artificially low while competing for market share and new revenue to invest in a booming stock market. As the bull market surged, investments by these historically conservative insurers rose to 10.6% in 1999, up from a more typical 3% in 1992. With the market now in a slump, the insurers can no longer use investment gains to subsidize low rates. The industry reported realized capital gains of $381 million last year, down 30% from the high point in 1998, according to the A. M. Best Company, one of the most comprehensive sources of insurance industry data." (Page 3)

Source: American Medical Association Report 35 of the Board of Trustees (A-02), available at http://www.ama-assn.org/ama1/upload/mm/annual02/bot35a02.rtf.