Social Aspects of the Rate Structure of Medical Malpractice Insurance

Abstract

questions of social equity arising from the current medical malpractice insurance system and how these questions are handled by insurance regulation are explored in this article. medical malpractice rating classification system is examined in terms of the distinctions between the medical specialties and the resulting liability exposure. theoretical fairness of the system is questioned and a potential new approach to medical malpractice insurance rating is suggested. Medical malpractice insurance appears to be a desirable risk handling mechanism that should be available in today's complex society. Without such a system available at reasonable cost, society may find the burden of medical malpractice losses falling on segments of the public least able to afford the cost. social equity questions arising from the current medical malpractice insurance system and how they are handled by insurance regulation are explored in this article. Objectives of Insurance Regulation Professor Spencer Kimball pointed out two objectives of insurance regulation which are inherent in the internal working of the insurance business.' These objectives are those of solidity, and aequum et bonum. solidity issue concentrates on the financial solvency of insurers. Regulations aimed at the solidity objective would include such measures as allowable investments and rate adequacy laws. Solvency is fundamental to the insurance system. This article, however, concentrates on the objective of caequum et bonurn. Kimball indicates that the term does not have an exact meaning but it encompasses the ideas of fairness, equality, morality and equity.2 Basic to this objective is the reasonableness of the price of the insurance itself. Implied in this objective is a reasonable price to all Jerry S. Rosenbloom is Associate Professor of Insurance and Executive Director of the S. S. Huebner Foundation for Insurance Education at the Wharton School of the University of Pennsylvania. He is a member of the Board of Directors of the American Risk and Insurance Association. Gary K. Stone is Professor of Insurance at Michigan State University. 'Kimball, Spencer, The Purpose of Regulation: A Preliminary Inquiry in the Theory of Insurance Law, Minnesota Law Review, Vol. 45 (1961).