Reasonable MPL claim reserves on the company level will likely lead to a favorable industry-wide total reserve. " >

The MPL industry unpaid-claim reserve: The whole may be greater than the sum of the parts

  • Print
  • Connect
  • Email
  • Facebook
  • Twitter
  • LinkedIn
  • Google+
By Charles Mitchell, Shaun Cullinane | 01 January 0001

The medical professional liability (MPL) insurance industry has seen lower overall claim costs, driven by a recent decline in the number of MPL claims. The unexpected magnitude and duration of the decline in claim frequency have precipitated a favorable runoff in unpaid claim reserves since 2005.

Some industry observers believe that there continues to be an industry-wide redundancy in unpaid claim reserves at this point. This apparent redundancy, which shows up at the industry-wide level, may not translate down to the level of individual companies. The statistical properties of unpaid-claim liabilities at the company level, where reserving decisions are made, differ from those of the industry as a whole.

Favorable reserve developments should not lead to a conclusion that reserves are being set too high. If individual companies set reasonable claim reserves, the industry’s total reserve will likely still develop favorably more often than not.

-

Reprinted from the Third Quarter 2012 issue of Physician Insurer Magazine, Physician Insurers Association of America. Copyright, 2012.