Study: Social Inflation Accounts for $2.4 to $3.5 Billion of All Medical Malpractice Losses

Social inflation accounted for between $2.4 and $3.5 billion, or 8 to 11 percent, of all medical malpractice losses incurred by physician-focused insurers in the decade ending in 2021.

Source: The Doctors Company | Published on January 24, 2023

Social inflation and medical malpractice

According to new research from The Doctors Company, the nation’s largest physician-owned medical malpractice insurer and part of TDC Group, social inflation accounted for between $2.4 and $3.5 billion, or 8 to 11 percent, of all medical malpractice losses incurred by physician-focused insurers in the decade ending in 2021.

Moore Actuarial Consulting, LLC was hired by The Doctors Company to conduct the study, “Medical Malpractice Claims-Made Social Inflation and Loss Development Report,” in order to determine the level of social inflation in the U.S. physician medical malpractice claims-made market. When an insurer’s average claim amount grows faster than the overall inflation rate, this is referred to as social inflation. When this occurs, insurers are forced to raise rates and/or reduce coverage to keep up.

“As an organization led by physicians, we know that commissioning important industry research is part of our mission to serve those who provide care. The study we are releasing today shows that physicians are affected by social inflation,” said Robert E. White, Jr., President of TDC Group. “Our research shows that the pace of settlements larger than $1 million has accelerated, and large settlements are a significant driver of social inflation. It is a reason malpractice premiums are rising for many physicians.” Independently practicing advanced practice clinicians, such as some nurse practitioners, may also be affected.

The study examined loss development factors (LDFs), a standard actuarial metric, across more than a decade for physician-focused medical malpractice insurers. In theory, these factors should change little except for random variation. Instead, they have been rising. The study uses the increase in LDFs to estimate the impact of social inflation. In addition, the study examines data from the National Practitioner Data Bank (NPDB), a federal dataset that collects information on, among other things, malpractice payments.

The full study can be found at thedoctors.com/socialinflation.

About The Doctors Company

Founded and led by physicians, The Doctors Company (thedoctors.com) is relentlessly committed to advancing, protecting, and rewarding the practice of good medicine. The Doctors Company takes the mal out of malpractice insurance by helping hospitals and practices of all sizes manage the complexities of today’s healthcare environment—with expert guidance, resources, and coverage. The Doctors Company is part of TDC Group (tdcg.com), the nation’s largest physician-owned provider of insurance, risk management, and healthcare practice improvement solutions. TDC Group serves the full continuum of care, from individual physicians to academic medical systems—over 100,000 healthcare professionals and organizations nationwide—with annual revenue of $1 billion, and over $6.5 billion in assets.

About Moore Actuarial Consulting, LLC

Jim Lynch is a casualty actuary with an extensive background in media relations. From 2015 to 2020, he was Chief Actuary of the Insurance Information Institute, a nonprofit industry organization, speaking on a variety of property/casualty issues in outlets such as the New York Times, Wall Street Journal, NBC News, and the Public Broadcasting System. He has testified frequently before state regulators and before Congress, including in 2019, when he spoke on automobile rating factors. He continues to write about actuarial issues in the trade press.

Dave Moore is the President of Moore Actuarial Consulting, LLC, and has extensive pricing and reserving experience for a broad range of property and casualty insurance products. He has spoken at a variety of P&C industry conferences. Mr. Moore is a regular contributor and presenter at the Insurance Information Institute’s quarterly webinar on P&C industry results. He has written on actuarial and/or insurance-related topics, including social inflation.