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.