Document Type
Article
Publication Title
North American Actuarial Journal
Publication Date
4-2020
ISSN
1092-0277
Page Number
626
Keywords
malpractice, tort reform, insurance markets, noneconomic damage
Disciplines
Insurance Law | Law
Abstract
This study examines how tort reform affects uncertainty in insurance markets by testing whether noneconomic damage caps influence reserving volatility for medical malpractice insurers. Using a panel of insurers from 1986 to 2009, we estimate the determinants of loss reserve error volatility and focus on how this volatility is influenced by the percent of premiums an insurer writes that are subject to noneconomic damage caps. We find empirical evidence that tort reform reduces reserve volatility over the subsequent 3- and 5-year periods, consistent with tort reform improving insurers’ loss forecasting ability. Our findings address outcomes of tort reform that are prominent concerns of legislators, regulators, and policyholders. This article contributes both to the literature examining the insurance market effects of tort reform and to the literature examining loss reserving practices.
Recommended Citation
W. Kip Viscusi, Patricia H. Born, and Evan M. Eastman,
Reducing Medical Malpractice Loss Reserve Volatility Through Tort Reform, 24 North American Actuarial Journal. 626
(2020)
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/1690