Florida medical malpractice market marked by low profitability

Stacked up against the country’s other five most populous states, Florida’s medical malpractice market ranks fourth lowest in overall profitability.

On the flip side of the coin, Florida ranks fourth highest among the compared states in two categories: losses to earned premium ratio at 40.2 percent; and combined loss and defense cost to earned premium basis ratio at 61.7 percent.

Loss experience in Florida was competitive when compared to that of the other large states of California, Illinois, New York, Pennsylvania and Texas.

The report’s author, Ray Spudeck, chief economist for Florida’s Office of Insurance Regulation, looked at the combned loss ratio and the defense cost containment ratio on a statewide basis in each state. Again, Florida falls mid-way at 61.7 percent within a range of 48.4 percent in Texas to 107.3 percent in New York. “The lower the ratio, the stronger the indication of profitability,” he said.

Comparing the markets of the six most populous states, Florida ranked highest — at 29 percent — in measuring the combined non-loss costs to earned premium ratio. Non-loss costs included agent commissions and brokerage fees; taxes and licensing fees; and defense cost containment or legal fees.

Florida had the third lowest defense cost and containment expense, with 21.3 percent of the premium dollar being spent to defend or contain costs for malpractice.

Spudeck drew data from 15 insurers, comprising 80 percent of the market in Florida. The average return on surplus for this segment was 13.2 percent in 2005, up from 9.6 percent in 2004 and –12 percent in 2003.

Also, Florida rate increases in 2005 were less than in 2004.

Findings also revealed that a state’s population does not directly correlate to its level of malpractice premium earned. Florida is the third largest market in direct premium written among the six states. New York — third most populous — has the largest total of reported losses, more than double Illinois’ losses. California is fourth, surpassing Florida, which ranked fourth last year.

Topics Florida New York