The effect of 1980s tort reform legislation on general liability and medical malpractice insurance.

Tort Law and Medical Malpractice Insurance Premiums

“…Thorpe (2004) found that damage caps reduced premium income by 17.1%. Viscusi et al (1993) found ''reforms'' enacted in 1985 or 1986 reduced aggregate premium income by 27.7% and 21.4%, respectively, but damage caps had no statistically significant effects in other specifications. This wide range perhaps may be explained by different measures of tort reform, different time frames (Gius and Thorpe) and, in the case of Gius, the use of random effects modeling.…”

“…Zuckerman, Bovbjerg, and Sloan (1990) concluded that damage caps over the 1974-1986 period reduced premiums by 13% to 17% in the short run depending on specialty. Kessler and McClellan (1997) found that ''direct reforms'' (essentially damage caps) reduced premiums by 8.4% over the 1985-1993period. And Danzon, Epstein, and Johnson (2004 reported that damage caps of $500,000 or less reduced average premiums by 5.7% over the 1994-2003 period.…”

“…They found that states that implemented the four reforms analyzed reduced aggregate short-run premium income by 16.6%. Viscusi et al (1993) expanded and refined the Blackmon and Zeckhauser study, focusing on reforms in 1985, 1986, and 1987. They concluded that states enacting some sort of ''reform'' in 1985 or 1986 reduced the increase in premium income by 27.7% and 21.4% respectively; however, an examination of specific reforms found no statistically significant effects of damage caps.…”

Do damages caps reduce medical malpractice insurance premiums? A systematic review of estimates and the methods used to produce them

“…Bhat (2001) uses premiums charged by a single multi-state medical malpractice insurer for physicians of the same risk class and for $1M/$3M policies. Others use aggregate premiums written (Blackmon et al, 1991;Viscusi et al 1993) or aggregate premiums earned (Viscusi and Born, 1995;Born and Viscusi 1998) as a proxy for price. 15 Finally, several authors employ loss ratios-the ratio of losses incurred by an insurer to total premiums earned by that insurer-as a proxy for price.…”

“…30 In some cases, researchers (e.g., Viscusi (1993)) coded binary variables to track whether states enacted any of a number of different tort reforms (e.g., any number of pro-defendant reforms, any reforms in place prior to premiums period, any reforms in place other than caps). This method produces more noise than methods that include separate controls for covariates.…”