California Insurance Commissioner Jones Calls on Medical Malpractice Insurers to Reduce Rates
February 22, 2011by
side note: Uh-oh! Is the Commissioner cracking the whip on out-of-control medical professional liability insurance rates? Or is he off-base, and rates are where they should be in California? Insurance Commissioner Dave Jones today contacted several medical malpractice insurers raising concerns about excessive rates and asking that they make a rate filing with the California Department of Insurance (CDI) to reduce their rates. "Unlike health insurance, where I do not have the authority to reject excessive rates, the Insurance Commissioner does have the authority to regulate the rates of medical malpractice insurance paid for by doctors, surgeons, clinics and other health providers," Commissioner Jones said. "We have found that recent loss ratios - the percentage of every premium dollar the insurer spends on claims - of many medical malpractice insurers are low, and that's why I have directed my staff to carefully examine the rates of medical malpractice insurers. Low loss ratios are one indication that premiums may be too high." The authority to regulate medical malpractice insurance rates comes from provisions of law put into place by Proposition 103 in 1988. The Proposition 103 provisions include a mandate that insurers apply to the Insurance Commissioner for prior approval of rates and prohibit the use of excessive rates. Historically, this authority has been used to reduce medical malpractice rate increases and in some cases to require additional decreases in medical malpractice rates. The success CDI has had with regulating medical malpractice rates is another example of the benefits of strict rate regulation requirements. The provisions of Proposition 103 apply to most property-casualty coverages including personal auto and homeowners but do not apply to health insurance rates. For those medical malpractice insurers where CDI has reason to believe the rates are excessive, the insurer will be required to make a rate filing with the Department, after which, the Department will conduct a review to evaluate the filing and approve a rate level that complies with the law.