Kodiak, I note that you brought in new "facts and figures" to show the "other side." I'm not sure where the "truth" lies, but since you covered new ground, you may find this study interesting:
centerjd.org
Excerpts:
"We obtained data on insurance rate and loss cost movement in every state from 1985 through 1998.3 We then segregated the states into three categories: states that enacted the fewest number of tort law changes over the period; states that passed a midrange level of tort law limits; and states that enacted the most “tort reform.”
The hypothesis we tested was simple: if tort law limits succeed in reducing insurance costs for consumers of insurance, that should be evident in the trends of insurance costs. As tort law limits get more severe, the trends in rates and underlying loss costs should be less. We tested this hypothesis for the lines of insurance subject to general tort reform and to product liability and medical malpractice separately, since states often enact separate tort law restrictions to be applied just in those areas.
We found that the trends in rates/loss costs do not support the hypothesis that “tort reform” has succeeded in holding down insurance costs or rates. Despite what “tort reform” proponents promised lawmakers, tort law limits enacted since the liability insurance crisis of the mid-1980s have not lowered insurance rates in the ensuing years. States with little or no tort law restrictions have experienced the same level of insurance rates as those states that enacted severe restrictions on victims’ rights.
The “liability insurance crisis” of the mid-1980s was ultimately found to be caused not by legal system excesses but by the economic cycle of the insurance industry. Given large rate increases and cut backs in coverage, the insurance cycle soon turned again and prices began to fall. The nation has enjoyed a relatively “soft” insurance market for over a decade now – with rates of liability insurance not only stable but down.
Just as the liability insurance crisis was found to be driven by the insurance underwriting cycle and not a tort law cost explosion as many insurance companies and others had claimed, the “tort reform” remedy pushed by these advocates failed. As the findings of this report confirm, legal system restrictions are based upon a false predicate. “Tort reforms” do not produce lower insurance costs or rates.
3 “Loss cost” is the term for the portion of each premium dollar taken in, that insurance companies use to pay for claims and for the adjustment of claims. Insurers use other parts of the premium dollar to pay for: their profit, commissions, other acquisition expenses, general expenses and taxes. Loss costs represent the largest part of the premium dollar for most lines of insurance.
......
By 1985 when interest rates had dropped and investment income had decreased accordingly, the industry responded by sharply increasing premiums and reducing availability of coverage, creating a “liability insurance crisis.”
As Business Week magazine explained a January, 1987 editorial:
Even while the industry was blaming its troubles on the tort system, many experts pointed out that its problems were largely self-made. In previous years the industry had slashed prices competitively to the point that it incurred enormous
losses. That, rather than excessive jury awards, explained most of the industry's financial difficulties.5
The Ad Hoc Insurance Committee of the National Association of Attorneys General concluded after studying the “crisis” in 1986: The facts do not bear out the allegations of an “explosion” in litigation or in claim size, nor do they bear out the allegations of a financial disaster suffered by
property/casualty insurers today. They finally do not support any correlation between the current crisis in availability and affordability of insurance and such a litigation “explosion.” Instead, the available data indicate that the causes of, and therefore solutions to, the current crisis lie with the insurance industry itself.6
State commissions in New Mexico, Michigan and Pennsylvania reached similar conclusions.7 Even the insurance industry admitted this internally. In 1986, Maurice R. Greenberg, President and Chief Executive Officer of American International Group, Inc., one of the country’s leading property/casualty companies, told an insurance audience in
Boston that the industry’s problems were due to price cuts taken “to the point of absurdity” in the early 1980s.
Had it not been for these cuts, Greenberg said, there would not be ‘all this hullabaloo’ about the tort system.”8 But to the public and to lawmakers, insurers told a different story. In fact, coming out of their bottom year of 1984, insurance companies began a “massive effort to market 4 One actuary at this time was quoted as saying “we don’t need premiums anymore,” relying instead on tax credits coupled with high interest rates.
5 "What Insurance Crisis?," Business Week, January 12, 1987, p. 154.
6 Francis X. Bellotti, Attorney General of Massachusetts, et al., Analysis of the Causes of the Current Crisis
of Unavailability and Unaffordability of Liability Insurance (Boston, Mass.: Ad Hoc Insurance Committee
of the National Association of Attorneys General, May, 1986).
7 See, e.g., New Mexico State Legislature, Report of the Interim Legislative Workmen's Compensation
Comm. on Liability Insurance and Tort Reform, November 12, 1986; Michigan House of Representatives,
Study of the Profitability of Commercial Liability Insurance, November 10, 1986; Insurance Comm.
Pennsylvania House of Representatives, Liability Insurance Crisis in Pennsylvania, September 29, 1986.
8 Greewald, “Insurers Must Share Blame: AIG Head,” Business Insurance, March 31 1986, p. 3." |
