Experience Rating in Medical Professional Liability Insurance

The case for using the claims experience of individual health care providers in setting appropriate premium rates for malpractice insurance has been frequently debated, particularly in recent years with the development of what has been called the affordability crisis in medical malpractice insurance. The theoretical efficacy of experience rating must surely be above dispute as pricing insurance without using available knowledge about the loss expectancy of the policyholder is obviously both inefficient and irrational. The debate has thus largely centered on the practical feasibility of experience rating and the magnitude of any implied impact. At present, medical malpractice experience information is not collected in any systematic way beyond that collected by insurers themselves for their current policyholders. If a physician switches insurers, he effectively starts over as insurers rarely share experience information among themselves. In addition, most current medical malpractice insurers have only been in existence since the mid to late 1970's and, as a result, have limited information on even their current policyholders. In Economics of Oligopoly: Medical Malpractice Insurance as a Classic Illustration [2], the authors recommend mandatory collection of malpractice