Insurance costs and rates don't lower after tort reform

Author Subject: Insurance costs and rates don't lower after tort reform
Chris Posted At 15:27:04 05/16/2000
FOR RELEASE: July 13, 1999 11:00 AM EST
CONTACT: Joanne Doroshow (212) 267-2801
J. Robert Hunter (207) 864-3953


NEW YORK -- A major new report released today by the national consumer group Citizens for Corporate Accountability & Individual Rights (CCAIR) finds that laws that restrict injured consumer’s rights to go to court -- so-called "tort reform" - have failed to cut insurance costs or rates around the country.

The report analyzes for the first time one of the principal arguments on which proponents of "tort reform" rely -- that enactment of these laws will reduce insurance rates -- and finds the argument invalid. The report, Premium Deceit -- the Failure of "Tort Reform" to Cut Insurance Prices, is co-authored by actuary J. Robert Hunter, Director of Insurance for the Consumer Federation of America (CFA), former Commissioner of Insurance for the State of Texas, and former Federal Insurance Administrator under Presidents Carter and Ford; and Joanne Doroshow, Executive Director of Citizens for Corporate Accountability & Individual Rights (CCAIR), an attorney who has represented consumer interests on civil justice issues since 1986.

According to Hunter, "This report is the most extensive review of insurance rate activity in the wake of the “liability insurance crisis” of the mid-1980s ever undertaken. It was designed to test the impact on liability insurance rates of “tort reforms” enacted in reaction to the liability insurance crisis, and in the years since. Despite years of claims by insurance companies that rates would go down following enactment of tort reform, we found that tort law limits enacted since the mid-1980s have not lowered insurance rates in the ensuing years. States with little or no tort law restrictions have experienced approximately the same changes in insurance rates as those states that have enacted severe restrictions on victims’ rights."

According to co-author Doroshow, "For years, insurance companies and their corporate allies have argued that our civil justice system is responsible for unaffordable liability insurance. They have convinced lawmakers around the country to enact legislation that makes it nearly impossible for many seriously injured consumers to hold their offenders financially responsible in court by promising such laws would bring down insurance rates.

"This study has, for the first time, definitively exposed the campaign to restrict consumers' rights for what it is -- an insidious public relations scam that has had terrible consequences for many innocent people, while doing nothing to improve the affordability or availability of liability insurance for businesses or professions," Doroshow added.

The report examines Insurance Services Office (ISO) data in every state plus the District of Columbia, for the years 1985 through 1998, covering the following lines of insurance that would be affected by "tort reform": Commercial Auto Bodily Injury and Property Damage Liability, Personal Combined Total Limits Liability, Owner’s, Landlord’s and Tenants (OL&T) Liability, Manufacturer’s and Contractor’s (M&C) Combined Total Limits Liability, Special Multi-Peril, Hospital Professional Liability, Physicians’, Surgeons’ and Dentists’ (PS&D) Professional Liability, and Product Combined Total Limits Liability. (ISO data represent the most reliable and largest database for determining trends in insurance costs as measured either by final rates being suggested by ISO in the 1980s or by the trends in loss costs -- i.e. the expected claims costs -- in more recent years.)

The report then measured the impact on insurance costs of major "tort reforms" enacted in each state since 1985. To ensure that only relevant lines of insurance were evaluated, laws were divided into three separate sections: limits that apply across the board in tort cases, limits that apply in medical malpractice cases, and limits that affect product liability actions. States were then arranged into three categories, depending on the number of tort law limits passed and the length of time each has been in place, and analyzed. The report’s key findings are:-- Enactment of tort law limits around the country over the last 14 years has not succeeded in reducing insurance prices for insurance consumers.-

Some states that have resisted enacting any "tort reform" since 1985 have experienced low increases in insurance rates or loss costs relative to the national trends, and some states that enacted major "tort reform" packages have seen very high rate or loss cost increases relative to the national trends. The report concludes, "Laws that restrict the rights of injured consumers to go to court do not produce lower insurance costs or rates, and insurance companies that claim they do are severely misleading this country’s lawmakers.

"Copies of the report are available for purchase, for $100, from Citizens for Corporate Accountability & Individual Rights. Discounts are available for non-profit groups and for bulk orders. Contact CCAIR for more information: 212/267-2801. The report contains several color charts.

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