Real Estate Malpractice Insurance Operating at a Loss in Missouri

The real estate malpractice insurance line of business has operated at a loss over the last decade, according to a report recently released by the Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP).

The 2008 Real Estate Malpractice Report covers the period 1999 to 2008, and contains information about claims arising from alleged errors or omissions associated with real estate transactions.

Among the highlights:

• Losses plus defense costs equal 230 percent of premium over the last ten years, and 161 percent of premium over the last five years.
• In 2008, real estate malpractice insurers paid claims equal to 60 percent of premium. An additional 59 percent was paid out for defense and other costs associated with defending their insureds.
• Real estate malpractice is a relatively small line of business. In 2008, only 89 claims were closed, and only 18 claims resulted in payment.
• Average claims payments are relatively small compared to other liability lines. For example, the average medical malpractice payment in 2008 was nearly $300,000, while the average legal malpractice claim was $84,000. Average real estate malpractice payments rarely exceed $15,000, and are frequently less than $5,000. The average payment in 2008 was $11,802.
• Real estate professionals have fewer companies to choose from for this line of insurance compared to other property casualty lines. In 2008, only six companies sold such policies, and one company, Continental Casualty, maintains a 70 percent market share.
• By far the most common alleged error or omission was a failure to disclose a material fact about a property, giving rise to 76 percent of claims between 1999 and 2008.

The report is available at this link: http://insurance.mo.gov/reports/remal/index.htm

Source: Missouri Department of Insurance, Financial Institutions and Professional Registration

Topics Profit Loss Claims Missouri