Medical Malpractice Insurance & The Insurance Cycle
Medical Professional Liability & the P/C Insurance Industry
31st Annual Physician Insurance Association of America Meeting Philadelphia, PA May 15, 2008
Robert P. Hartwig, Ph.D., CPCU, President Insurance Information Institute 110 William Street New York, NY 10038
Tel: (212) 346-5520 Fax: (212) 732-1916 bobh@iii.org www.iii.org
Presentation Outline
• P/C Operating Overview & Outlook
Profitability Underwriting Trends Premium Growth & Price Drivers Capacity & Surplus
• Medical Professional Liability Insurance Overview
Medical & Health Care Cost Inflation Med Mal Operating Results Med Mal Investment Performance
• Med Mal Tort Environment • P/C Investment Overview & Outlook • Weakening Economy: Insurance Impacts & Implications
• Catastrophic Loss: Spillover Effects? • Shifting Legal Liability & Tort Environment: P/C
Implications of Treasury reform ―Blueprint‖ for insurers
P/C INSURANCE OPERATING OVERVIEW
The Cycle is Alive and Well
PROFITABILITY
Insurer Profits in 2006/07 Reached Their Cyclical Peak
P/C Net Income After Taxes 1991-2008F ($ Millions)*
$70,000 $60,000 $50,000 $40,000
$14,178 $10,870
2001 ROE = -1.2% 2002 ROE = 2.2% 2003 ROE = 8.9% 2004 ROE = 9.4% 2005 ROE= 9.6% 2006 ROE = 12.2% 2007 ROAS1 = 12.3%**
$65,777
$61,940
Insurer profits peaked in 2006
$36,819 $38,501 $44,155
$30,773
$24,404
$20,598
$21,865
$30,000 $20,000 $10,000 $0 -$10,000
$5,840
$19,316
$20,559
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
*ROE figures are GAAP; 1Return on avg. surplus. **Return on Average Surplus; Sources: A.M. Best, ISO, Insurance Information Inst.
08F
-$6,970
$3,046
$30,029
$49,900
ROE: P/C vs. All Industries 1987–2008E
20%
P/C profitability is cyclical, volatile and vulnerable
15%
10%
Sept. 11
5%
Hugo
0%
Lowest CAT losses in 15 years
Katrina, Rita, Wilma
Andrew
-5%
Northridge
91 92 93 94 95 96 97 98 99 00 01 02 03
4 Hurricanes
08F 04 05 06 07
87
88
89
90
US P/C Insurers
2008 P/C insurer ROE is I.I.I. estimate. Source: Insurance Information Institute; Fortune
All US Industries
Profitability Peaks & Troughs in the P/C Insurance Industry,1975 – 2008F*
25%
1977:19.0%
20%
1987:17.3%
2006:12.2%
1997:11.6%
15% 10% 5% 0%
1975: 2.4%
-5%
1984: 1.8%
1992: 4.5%
2001: -1.2%
*GAAP ROE for all years except 2007 which is actual ROAS of 12.3%. 2008 P/C insurer ROE is I.I.I. estimate. Source: Insurance Information Institute, ISO; Fortune
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07E 08F
ROE vs. Equity Cost of Capital: US P/C Insurance:1991-2007
18% 16% 14%
+1.7 pts -9.0 pts -13.2 pts
The p/c insurance industry achieved its cost of capital in 2005/6 for the first time in many years
+2.3 pts
12% 10%
+0.2 pts
8% 6% 4% 2% 0% -2% -4%
US P/C insurers missed their cost of capital by an average 6.7 points from 1991 to 2002, but on target or better 2003-07
91 92 93 94 95 96 97 98 99 00 01 02 03
The cost of capital is the rate of return insurers need to attract and retain capital to the business
04 05 06 07
Source: The Geneva Association, Ins. Information Inst.
ROE
Cost of Capital
-0.1 pts
P/C, L/H Stocks: Lagging the S&P 500 Index in 2008
Total YTD Returns Through May 9, 2008
P/C, Life insurance stocks underperforming S&P— concerns about soft market, credit/subprime exposure of some companies Mortgage & Financial Guarantee insurers were down 69% in 2008
-54.41% -4.30% -24.75% -17.48% -5.41% -17.47% -7.89% -8.22%
S&P 500 All Insurers P/C Life/Health Multiline Reinsurance Mortgage* Brokers
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
*Includes Financial Guarantee. Source: SNL Securities, Standard & Poor’s, Insurance Information Inst.
Factors that Will Influence the Length and Depth of the Cycle
• Capacity: Rapid surplus growth in recent years has left the industry with between $85 billion and $100 billion in excess capital, according to analysts
All else equal, rising capital leads to greater price competition and a liberalization of terms and conditions
• Reserves: Reserves are in the best shape (in terms of adequacy) in decades, which could extend the depth and length of the cycle
Looming reserve deficiencies are not hanging over insurers they way they did during the last soft market in the late 1990s Many companies have been releasing redundant reserves, which allows them to boost net income even as underwriting results deteriorate Reserve releases will diminish in 2008; Even more so in 2009
• Investment Gains: 2007 was the 5th consecutive up year on Wall Street. With sharp declines in stock prices and falling interest rates, portfolio yields are certain to fallContributes to discipline
Realized capital gains are already rising as underwriting profits shrink, but like redundant reserves, realized capital gains are a finite resource A sustained equity market decline (and potentially a drop in bond prices at some point) could reduce policyholder surplus
Source: Insurance Information Institute.
Factors that Will Influence the Length and Depth of the Cycle (cont’d)
• Sarbanes-Oxley: Presumably SOX will lead to better and more conservative management of company finances, including rapid recognition of deficient or redundant reserves
With more ―eyes‖ on the industry, the theory is that cyclical swings should shrink
• Ratings Agencies: Focus on Cycle Management; Quicker to downgrade
Ratings agencies more concerned with successful cycle management strategy Many insurers have already had ratings ―haircut‖ over the last several years they way they did during the last soft market in the late 1990s; Less of a margin today
• Finite Reinsurance: Had smoothing effect on earnings; Finite market is gone • Information Systems: Management has more and better tools that allow faster adjustments to price, underwriting and changing market conditions than it had during previous soft markets • Analysts/Investors: Less fixated on growth, more on ROE through soft mkt.
Management has backing of investors of Wall Street to remain disciplined
• M&A Activity: More consolidation implies greater discipline
Liberty Mutual/Safeco deal creates 5th largest p/c insurer. More to come?
Source: Insurance Information Institute.
FINANCIAL STRENGTH & RATINGS
Industry Has Weathered the Storms Well, But Cycle May Takes Its Toll
P/C Insurer Impairment Frequency vs. Combined Ratio, 1969-2007E
120 115
Combined Ratio
Impairment rates are highly correlated underwriting performance and could reach nearrecord low in 2007
Combined Ratio after Div P/C Impairment Frequency
2 1.8 1.6 1.4 1.2 1 0.8 0.6
2006 impairment rate was 0.43%, or 1-in-233 companies, half the 0.86% average since 1969; 2007 will be lower; Record is 0.24% in 1972
110 105 100 95 90
0.4 0.2 0
Source: A.M. Best; Insurance Information Institute
69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07E
Impairment Rate
Reasons for US P/C Insurer Impairments, 1969-2005
2003-2005
Affiliate Problems 8.6% Catastrophe Losses 8.6% Alleged Fraud 11.4% Rapid Growth 8.6% Deficient Loss Reserves/Inadequate Pricing 62.8%
1969-2005
Reinsurance Sig. Change Failure in Business 3.5% 4.6% Misc. 9.2% Deficient Loss Reserves/Inadequate Pricing 38.2%
Investment Problems* 7.3%
Deficient reserves, CAT losses are more important factors in recent years
Affiliate Problems 5.6% Catastrophe Losses 6.5%
Alleged Fraud 8.6%
Rapid Growth 16.5%
*Includes overstatement of assets.
Source: A.M. Best: P/C Impairments Hit Near-Term Lows Despite Surging Hurricane Activity, Special Report, Nov. 2005;
UNDERWRITING
TRENDS
Extremely Strong 2006/07; Relying on Momentum & Discipline for 2008
P/C Insurance Combined Ratio, 1970-2008F*
Combined Ratios
120
1970s: 100.3
1980s: 109.2 1990s: 107.8
115
110
2000s: 102.0*
105
100
95
90
Sources: A.M. Best; ISO, III
70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08F
*Full year 2008 estimates from III.
P/C Insurance Combined Ratio, 2001-2008F
120 115.8
110
As recently as 2001, insurers were paying out nearly $1.16 for every dollar they earned in premiums
107.4
2007/8 deterioration due primarily to falling rates, but results still strong assuming normal CAT activity
2006 produced the best underwriting result since the 87.6 combined ratio in 1949
100.1 100 98.3
100.7 98.6 95.6 92.4
2005 figure benefited from heavy use of reinsurance which lowered net losses
90
01 02 03 04 05
Sources: A.M. Best; ISO, III. *III estimates for 2008.
06
07
08F
Ten Lowest P/C Insurance Combined Ratios Since 1920 vs. 2007
97 95 93 91.2 91 89 87.6 87 85
1949 1948 1943 1937 2006 1935 1950 1939 1953 1936 2007
Sources: Insurance Information Institute research from A.M. Best data. *2007: III Earlybird survey.
The 2006 combined ratio of 92.2 was the best since the 87.6 combined in 1949
2007 was the 20th best since 1920
93.0 93.1 93.1 93.3
95.6
92.1 92.3 92.4 92.4
The industry’s best underwriting years are associated with periods of low interest rates
Underwriting Gain (Loss) 1975-2008F*
35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30 -35 -40 -45 -50 -55
Insurers earned a record underwriting profit of $31.7 billion in 2006, the largest ever but only the second since 1978. Cumulative underwriting deficit from 1975 through 2007 is $422 billion.
$ Billions
Source: A.M. Best, Insurance Information Institute
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Commercial Lines Combined Ratio, 1993-2008F
125 120
Commercial coverages have exhibited significant variability over time.
112.5 112.3 110.3 110.2 111.1 109.7
Outside CAT-affected lines, commercial insurance is doing fairly well. Caution is required in underwriting long-tail commercial lines.
122.3 110.2
115 110 105 100 95 90 85
107.6
103.9
102.0
102.5
105.4
Recent results benefited from favorable loss cost trends, improved tort environment, low CAT losses, WC reforms and reserve releases
93 94 95 96 97 98 99 00 01 02 03 04 05
06 07E 08F
Sources: A.M. Best (historical and forecasts)
91.2
94.7
97.5
Impact of Reserve Changes on Combined Ratio
$40 8.6 8.9 6.5 $35 $30 $25 $20 $15 0.1 $0.4 $10 $5 $0 ($5) ($10)
00 01 02 03 04
$22.8
$33.4
3.5
10 9 8 Reserve 7 adequacy has 6 4.5 improved 5 substantially 4 3 2 1 -1.2 -1.6 -1.3 -1.1 0 (1) ($5.0) (2) ($5.3) ($7.0)($6.0) (3)
06 07F 08F 09F
PY Reserve Development Combined Ratio Points
Reserve Development ($B)
05
Source: A.M. Best, Lehman Brothers estimates for years 2007-2009
Combined Ratio Points
$36.9
$10.8
$18.9
PREMIUM GROWTH
At a Virtual Standstill in 2007/08
Strength of Recent Hard Markets by NWP Growth*
25% 20% 15% 10% 5% 0% -5% -10%
1975-78 1984-87 2001-04
Post-Katrina period resembles 1993-97 (post-Andrew)
2007: -0.6% premium growth was the first decline since 1943
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007F 2008F
Note: Shaded areas denote hard market periods. Source: A.M. Best, Insurance Information Institute
Growth in Net Written Premium, 2000-2008F
15.3%
10.0% 8.4% 5.0%
P/C insurers are experiencing their slowest growth rates since 1943… underwriting results are deteriorating
3.9% 0.5%
4.3%
-0.6% -1.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008F
*2008 forecast from A.M. Best. Source: A.M. Best; Forecasts from the Insurance Information Institute.
WEAK PRICING
Under Pressure in 2007/08, Especially Commercial Lines
Average Commercial Rate Change, All Lines, (1Q:2004 – 1Q:2008)
-2% -4% -6% -8% -10% -12% -14% -16%
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
-0.1%
0%
Magnitude of rate decreases diminished greatly after Katrina but have grown again
-2.7% -3.2% -4.6% -3.0%
-5.9%
-7.0%
-9.4%
-8.2%
-5.3% -9.6%
-9.7%
-11.3%
-11.8%
3Q07 -13.3%
-12.0% 4Q07
KRW Effect
Source: Council of Insurance Agents & Brokers; Insurance Information Institute
1Q08 -13.5%
Cumulative Commercial Rate Change by Line: 4Q99 – 1Q08
Commercial account pricing has been trending down for 3+ years and is now on par with prices in late 2001, early 2002
Source: Council of Insurance Agents & Brokers
CAPACITY/ SURPLUS
Accumulation of Capital/ Surplus Depresses ROEs
U.S. Policyholder Surplus: 1975-2007*
$550 $500 $450 $400
Capacity as of 12/31/07 was $517.9B, 6.5% above year-end 2006, 81% above its 2002 trough and 55% above its 1999 peak.
$ Billions
$350 $300 $250 $200 $150 $100 $50 $0
The premium-to-surplus fell to $0.85:$1 at yearend 2007, approaching its record low of $0.84:$1 in 1998
“Surplus” is a measure of underwriting capacity. It is analogous to “Owners Equity” or “Net Worth” in non-insurance organizations
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Source: A.M. Best, ISO, Insurance Information Institute.
*As of December 31, 2007
Annual Catastrophe Bond Transactions Volume, 1997-2007
Risk Capital Issued Number of Issuances
$7,329.6
$8,000
Risk Capital Issues ($ Mill)
$7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 97
$4,693.4
25 20 15
$1,729.8 $633.0 $846.1$984.8 $1,139.0 $1,219.5 $966.9
$1,991.1
10 5 0
$1,142.8
98
99
00
01
02
03
04
05
06
07
Source: MMC Securities Guy Carpenter, A.M. Best; Insurance Information Institute.
Number of Issuances
Catastrophe bond issuance has soared in the wake of Hurricanes Katrina and the hurricane seasons of 2004/2005, despite two quiet CAT years
35 30
Lloyd’s Insurance Market Capacity, 1998-2008 (£ billions)*
The capacity of the Lloyd’s market rose significantly during the period 2001 to 2004. In 2005, capacity reduced but increased again in 2006 and 2007 due to the impact of the U.S. hurricane season. Capacity reduced to £15.95 billion ($32 billion) in 2008.
18 16
£ billions
£16.1 £15.95 £14.4 £14.9 £11.3 £10.2 £9.9 £10.1 £12.2 £14.8 £13.7
14 12 10 8 6 4 2 0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
*Beginning of the year. Source: Lloyd’s Members’ Services Unit.
P/C Insurer Share Repurchases, 1987- Through Q4 2007 ($ Millions)
Reasons Behind Capital BuildUp & Repurchase Surge
$25,000
2007 share buybacks shattered the 2006 record, up 214%
$22,322.6
•Strong underwriting results
•Moderate catastrophe losses
$20,000
$15,000
•Reasonable investment performance •Lack of strategic alternatives (M&A, large-scale expansion)
Returning capital owners (shareholders) is one of the few options available
2007 repurchases to date equate to 3.9% of industry surplus, the highest in 20 years
$5,266.0 $2,385.6 $4,497.5 $4,586.5 $5,242.3 $4,297.3 $4,370.0 $7,094.1
$10,000
$2,764.2
$952.4
$769.2
$646.9
$564.0
$311.0
$418.1
$566.8
$0
87
88
89
90
91
92
93
$310.1
94
$658.8
95
96
97
98
99
00
01
02
03
$763.7
$5,000
$1,539.9
04
05
06
Sources: Credit Suisse, Company Reports; Insurance Information Inst.
07
MEDICAL PROFESSIONAL LIABILITY OVERVIEW
Significant Improvements
MEDICAL & HEALTH CARE COST INFLATION
National Problem & Insurer Cost Driver
Consumer Price Index for Medical Care vs. All Items, 1960-2007
All Items Medical Care
(Base: 1982-84=100)
400
300
200
Inflation for Medical Care has been surging ahead of general inflation (CPI) for 25 years. Since 1982-84, the cost of medical care has more than tripled.
351.1
207.3
100
Source: Department of Labor (Bureau of Labor Statistics).
60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
0
National Health Expenditures and Health Expenditures as a Share of GDP, 1960-2017F ($ Billions)
$3,757
$4,000
$2,555 16.9% 15.3% 15.8%
National Health Exps
16.0%
17.1% $2,726 17.4% $2,905
15.9%
14.5%
15.9%
$3,500
13.7% 12.3%
$2,246 16.3%
$2,394 16.6%
20%
$3,000 $2,500
7.2%
$1,354
$1,470
$2,000
5.2%
$1,603
9.1%
$1,732 $1,852
$1,973
$2,106
15%
$1,191
$1,500 $1,000 $500 $0
$913 $1,125
$1,266
10%
$28
$75
$253
Health care expenditures will consumed 16.6% of GDP in 2008 and are expected to rise to 19.5% by 2017
02 03 04 05 06 07 E 08 E 09 E 10 E 11 E 12 E 13 E 14 E 15 E 16 E 17 E
5%
0%
93 97 98 99 00 01
60 70
National Health Expenditures
80 90
National Health Expenditures as % of GDP
Source: Centers for Medicare & Medicaid Services, Office of the Actuary; Insurance Information Institute.
National Health Exp. as % of GDP
$4,500
17.7% $3,098 18.0% $3,305 18.4% $3,524
$4,008 19.1%
19.5%$4,277
25%
$714
13.6% 13.6%
13.7%
13.8%
18.8%
National Health Expenditures Per Capita, 1960-2017E ($Bill)
$15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0
60
$148
$356
$1,100
$2,813
$3,469
$4,104
$4,297
$4,523
$4,790
$5,148
$5,560
$5,952
$6,301
$6,649
E
$7,026
E
$7,439
E
$7,868
E
$8,329
E
$8,816
E
$9,322
E
$9,862
E
$10,439
E
$11,043
E 16
$11,684
Health costs on a per capita basis continue to rise rapidly, as health expenditures rise faster than population growth
70
80
90
93
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
Source: Centers for Medicare & Medicaid Services, Office of the Actuary; Insurance Information Institute.
17
E
$12,369 $13,101
Average Annual Growth in US Per Capital Health Care Costs, 1960-2017F
25%
20.9%
20% 15% 10% 5% 0%
1960-1970 1970-1980 1980-1990
14.1%
15.6%
Over the net decade health care expenditures will likely increase well ahead of economic growth and the general pace of inflation
The 1970s were the most inflationary decade for medical costs at nearly 21% per year
7.0%
7.9%
7.6%
1990-2000
2000-2007
2007-2017
Source: Insurance Information Institute calculations based on data from the Centers for Medicare & Medicaid Services, Office of the Actuary.
WC Medical Severity Rising Far Faster than Medical CPI
16% 14% 12%
WC medical severity rose more than twice as fast as the medical CPI (8.8% vs. 4.0%) from 1995 through 2006
10.1% 10.6% 8.3% 7.4% 5.1% 4.5% 3.6%
14.0% 11.7% 9.0%
10% 8% 6% 4% 2% 0% 1995 1996 1997
8.2%
7.4%
6.8%
7.5%
3.5 pts
3.5% 2.8% 3.2% Change in Medical CPI
1998 1999 2000 2001 2002 2003
4.1%
4.6% 4.7%
4.0% 4.4% 4.2% 4.0%
Change Med Cost per Lost Time Claim
2004 2005 2006
Sources: Med CPI from US Bureau of Labor Statistics, WC med severity from NCCI based on NCCI states.
Med Costs Share of Total Costs is Increasing Steadily
2006p
1996
1986
Indemnity 52%
Medical 45%
Indemnity 41% Medical 59%
Medical 48%
Indemnity 55%
Source: NCCI (based on states where NCCI provides ratemaking services).
Auto Claim Costs Rise Faster than CPI or Health Care Costs
10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%
9%
Claimed BI economic losses are 3 times the overall inflation rate
8%
Inflation in auto insurance claims is a significant and longterm cost driver
6% 4% 3%
4%
Claimed BI Economic Loss
Total BI Payment
Claimed PIP Economic Loss
Total PIP Payment
CPI
CPI-Medical
Sources: Insurance Research Council, Auto Insurance Claims: Countrywide Patterns in Treatment, Cost and Compensation, 2008 Edition; Insurance Information Institute.
MEDICAL MALPRACTICE OPERATING ENVIRONMENT
Improved, But Still Vulnerable
Medical Malpractice Combined Ratio
170 160 150
127.9 142.5
Insurers in 2007 paid out an estimated $0.83 for every $1 they earned in premiums.
As recently as 2002, med mal insurers paid out $1.55 for every dollar earned
115.7 108.0 107.0 108.3 107.9 102.0 99.8 106.7 106.6 106.0 105.9 129.7 133.7
The dramatic improvement has restored med mal’s viability
137.5 111.0 100.1 98.4 101.0 100.8
140 130
103.7 108.8
115.7
108.0
110.1
110 100 90 80
107.5
120
115.8
154.7
91.2 92.5
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06 07P 08E
Medical Malpractice
Source: AM Best, Insurance Information Institute
All Lines Combined Ratio
83.0
94.5 98.6
96.4
95.6
Medical Malpractice: Losses & Expenses Paid vs. Premiums Earned
$11 $10 $9 $8
$5.2 $6.0
$7.5
$6.6
$4.8 $4.8 $5.1
$4.9 $5.3
$5.2
$4.0 $4.2
$4 $3 $2
90
91
$4.1
$5
$4.0 $4.1
92
$4.2 $4.6
93
$4.7 $4.5 $4.8
$6
94
95
96
97
98
$5.1
99
$5.6
$7
00
$6.1
01
$7.2
Before reforms took hold in the mid2000s, premium earned rose 54% while losses and expenses rose 125% over the period from 1990 through 2003,
$10.3
$12
$ Billions
$9.5
$11.6
02
03
$8.4 $9.3
$8.5
04
05
Earned Premiums
Losses & Expenses Paid
Source: Computed from A.M. Best data by the Insurance Information Institute
$9.6 $8.8
$9.5 $9.6
06
Medical Malpractice: Underwriting Loss/Profit, 1990-2007p
$2,000
$ Millions
$1,000
Med Mal underwriting losses exploded by $3.1 billion or 1059% between 1996 and 2001 $111.6
$14.4 -$147.8 -$230.8 -$344.1 -$289.3 -$387.1 -$808.6 -$1,517.7 -$1,890.6
$1,488.0 $848.3
$0
-$94.7 -$922.9
-$1,000
-$1,135.9
-$2,000
-$3,000
-$3,077.0 -$3,353.1 -$3,172.5
-$4,000 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Med Mal insurers now operating in the black
05 06 07
Source: Insurance Information Institute calculations based on data from A.M. Best.
Medical Malpractice: Cumulative Underwriting Losses
$ Millions
$0
-$231
-$1,515
-$1,747
-$1,859
-$1,733
-$2,022
-$2,000 -$4,000 -$6,000 -$8,000 -$10,000 -$12,000 -$14,000 -$16,000 -$18,000 -$20,000
-$379
-$2,409
-$3,218
-$4,735
-$6,626
-$16,229
-$17,151
90
91
92
93
94
95
96
97
98 99
00
01
02
03
04
05
-$17,246
06
-$16,398
07
Source: Insurance Information Institute calculations based on data from A.M. Best.
-$14,910
The cumulative underwriting loss in Med Mal from 1990-2003 totaled more than $17 billion
-$9,979
-$13,056
Outlook for MPLI Operating Environment
• Short-Term: Soft market persists, driven by relatively good underlying underwriting performance • Intermediate Term: Cyclical deterioration in profitability as underwriting begins to deteriorate under soft market conditions • Long-Run: Erosion of reforms of recent years begins to take toll, further damaging results • Conclusion: Underwriting Cycle can’t be banished, but its depth and length can be moderated via disciplined underwriting and pricing • Tort Cycle: Med Mal tends to experience a tort crisis every 10-15 years. If history is any guide, the next crisis will be evident around 2012-2015
Investment Component of Medical Malpractice Operating Results
Investment Gain: Med Mal vs. All Commercial Lines*
Investment returns have generally shrunk since 2000, but are still important. “Heavy Lifting” must be done through underwriting & pricing
30.2% 28.0% 27.4% 27.9% 14.3% 19.1% 29.3% 30.0%
35% 30% 25%
23.7%
16.8%
16.9%
16.8%
15.1%
15.5%
9.4% 15.1%
14.3%
14.1%
9.6% 12.8%
12.5%
20% 15% 10% 5% 0%
10.3% 14.0%
05
94
95
96
97
98
99
00
01
02
8.9%
03
04
Commercial Lines
Med Mal
*As a % of net earned premium. Investment gains consists primarily of interest, dividends and realized capital gains and losses. Source: A.M. Best; Insurance Information Institute estimate
10.2%
06
18.9%
Medical Malpractice Investment Gain*
$ Billions
$2.5
$2.1
Investment returns have risen, but poor investment environment today implies ―Heavy Lifting‖ must be done through underwriting & pricing
$1.8 $1.6 $1.2 $1.2 $0.9 $1.3 $1.3 $1.3
$2.0 $1.5 $1.0 $0.5 $0.0
90 91 92 $1.5 $1.5
$1.8 $1.5 $1.5 $1.4 $1.3$1.4
93
94
95
96
97
98
99
00
01
02
03
04
05
06
*Imputed from investment gain data as a % of net earned premium. Investment gains consists primarily of interest, dividends and realized capital gains and losses. Source: A.M. Best; Insurance Information Institute estimate
Medical Malpractice Tort Environment
Harvesting the Fruits of Reform
Medical Malpractice Tort Cost: Growth Continues, Though Modestly
$4.8 $5.8 $6.8 $6.7 $6.9 $7.3 $7.6 $8.5 $9.2 $10.1 $10.6 $11.5 $12.5 $13.3 $14.1 $15.5 $16.4 $17.9 $19.6 $21.7 $24.2 $26.5 $28.2 $29.4 $30.3
$32 $30 $28 $26 $24 $22 $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0
•Over the period from 1990 through 2006, medical malpractice tort costs rose 229%, more than double the
$ Billions
90% increase in tort costs generally over the same period. •Over the period from 1975 through 2006, medical malpractice tort costs have increased at an annual rate of 11.1 percent, versus 8.2 percent for all other tort costs.
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Sources: Tillinghast-Towers Perrin, US Bureau of Labor Statistics, Insurance Information Institute
$1.2 $1.4 $1.8 $2.2 $2.7 $3.4 $4.1
Medical Crises across the U.S.*
AMA: Crises reached in 22 states in the 2000s
AK AL WA ME
MT
ND MN
VT NH
OR
ID
WY
SD
WI MI
PA
NY
MA CT RI NJ
IA
NE NV UT OH DC
IL CO
KS
IN WV
VA
DE MD
MO
KY NC TN
CA
AZ HI
OK NM
AR MS LA AL GA
SC
TX
Crisis states at height of 2000s
FL
PR
*The AMA is no longer categorizing states as crisis states.
Source: American Medical Association, February 2008
2007 Top Ten Verdicts
Value Issue State
$109 Million $102.7 Million
$55.2 Million
Medical Malpractice Premises Liability, Death
Product Liability, Death
New York Florida
California
$54 Million
$54 Million
Private Air Crash
Nursing Home, Death
Florida
New Mexico
$50 Million
$50 Million
DUI Crash
Product Liability, Death
Florida
Alabama
$47.6 Million
$47.5 Million $45 Million
Prempro
Vioxx Auto Crash, Death
Nevada
New Jersey Florida
Source: LawyersWeekly USA, January 22, 2008.
2002 Top Ten Verdicts
Value
$28 Billion $2.2 Billion
Issue
Tobacco (Product Liability) Negligence (Pharmacy Mal)
State
Florida Missouri
$270 Million $225 Million
$150 Million $122 Million
Personal Injury (Burn) Product Liability (Rollover)
Tobacco (Product Liability) Product Liab. (Auto Accident)
Kentucky Texas
Oregon Virginia
$97.2 Million
$95.2 Million $91 Million $80 Million $80 Million
Business Fraud
Med Mal (Birth Injury) Medical Malpractice Med Mal (Birth Injury)
California
New York New York New York
Prod. Liab/Personal Inj. (Auto) Missouri
Source: LawyersWeekly USA, January 2003.
2001 Top Ten Verdicts
Value Issue State
$3 Billion $1 Billion
$480 Million
Tobacco Land Contamination
Private Airplane Crash
California Louisiana
Florida
$312.8 Million
$ 256 Million
Nursing Home
Police Auto Crash
Texas
Colorado
$116 Million
$114.9 Million
Intellectual Property Theft
Medical Malpractice
Virginia
New York
$108.2 Million
$107.8 Million $94.5 Million
Inheritance Dispute
Medical Malpractice Real Estate
Texas
New York California
Source: LawyersWeekly USA, January 2002.
Average Jury Award in Medical Malpractice Cases*
$5.0 $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 $1.14 $2.02 $1.88 $1.93 $2.92 $3.24 $2.89 $3.29 $3.74
$ Millions
$4.78 $4.26 $3.83
The average med mal jury award more than tripled between 1994 and 2005, but has moderated since 2002
98 99 00 01 02 03 04 05
94
95
96
97
*Ultimate award may be reduced by judge or upon appeal. Source: Jury Verdict Research; Insurance Information Institute.
Trends in Million Dollar Verdicts*
100% 90% 80% 70% 60% 50% 40%
17%
1996-1998
1999-2001
2002-2003
2004-2005
49%
37%
39%
41%
23% 31%
29%
32%
13%
14%
30%
4%
10% 0%
4% 4%
Vehicular Liability
5%
10% 8%
20%
Personal Negligence
8% 12%
Premises Liability
13%
Business Negligence
22%
Government Negligence
36%
Medical Malpractice
*Verdicts of $1 million or more. Source: Jury Verdict Research; Insurance Information Institute.
48%
Sharp jumps in multi-million dollar awards in recent years across most types of defendants. In med mal, million dollarplus awards rose from 36% of all awards from 1996-98 to 55% in 2004-05, well above most other categories.
51%
55%
Products Liability
59%
62%
64%
MERGER & ACQUISITION
Catalysts for P/C Consolidation Growing in 2008
P/C Insurance-Related M&A Activity, 1988-2006
Transaction Values Number of Transactions
$55,825
$40,032
$60,000
Transaction Value ($ Mill)
$40,000 $30,000
$11,534 $8,059 $5,638 $3,450 $2,780 $5,137 $5,100
100 80 60
$20,000
$2,435
40 20 0
$486
$0
Source: Conning Research & Consulting.
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
$425
$10,000
$1,882
$1,249
Number of Transactions
$30,873
$19,118
$20,353
$9,264
$35,221
$50,000
M&A activity began to accelerate during the second half of 2007
No model for successful consolidation has emerged
140 120
Motivating Factors for Increased P/C Insurer Consolidation
Motivating Factors for P/C M&As
• Slow Growth: Growth is at its lowest levels since the late 1990s
NWP growth was 0% in 2007; Appears similarly flat in 2008 Prices are falling or flat in most non-coastal markets
• Accumulation of Capital: Excess capital depresses ROEs
Policyholder Surplus up 6-7%% in 2007 and up 80% since 2002 Insurers hard pressed to maintain earnings momentum Options: Share Buybacks, Boost Dividends, Invest in Operation, Acquire Option B: Engage in destructive price war and destroy capital
• Reserve Adequacy: No longer a drag on earnings
Favorable development in recent years offsets pre-2002 adverse develop.
• Favorable Fundamentals/Drop-Off in CAT Activity
Underlying claims inflation (frequency and severity trends) are benign Lower CAT activity took some pressure of capital base
Source: Insurance Information Institute.
P/C INVESTMENT OVERVIEW
More Pain, Little Gain
Property/Casualty Insurance Industry Investment Gain1
$ Billions
$60 $50 $40 $35.4 $30 $20 $10 $0 $47.2 $42.8 $57.9 $52.3 $51.9 $44.4 $36.0 $45.3 $63.6 $56.9 $48.9 $59.4 $55.8
Investment rose in 2007 but are just 9.8% higher than what they were nearly a decade earlier in 1998
94 95 96 97 98 99 00 01 02 03 04 05* 06 07
1Investment
gains consist primarily of interest, stock dividends and realized capital gains and losses. 2006 figure consists of $52.3B net investment income and $3.4B realized investment gain. *2005 figure includes special one-time dividend of $3.2B. Sources: ISO; Insurance Information Institute.
Property/Casualty Industry Investment Results, 1994-2007
$70
Capital Gains/Losses Investment Income
$60
$9.7
Billions
$10.8
$50
$9.2 $6.0
$18.0
$13.7
$33.7 $1.7
$41.5
$39.9
$40.8
$38.6
$38.0
$36.8
$37.1
$30
$20
94 95 96 97 98 99 00 01 02** 03 04 05 06 07E
*Primarily interest, stock dividends, and realized capital gains and losses. **Not shown: $1.1B capital loss in 2002. 2005 figure includes special one-time dividend of $3.2B. Sources: ISO; Insurance Information Institute.
$36.7
$38.7
$39.6
$49.5
$52.3
$35.6
$54.6
$40
$6.9
$6.9
$9.3
$44.0
$48.9 $45.6
$16.9
$3.5
$57.9 $52.3
$9.0
Realized capital gains rising as underwriting results slip $57.7
$63.6 $59.2 $55.8
US P/C Net Realized Capital Gains, 1990-2007 ($ Millions)
$20,000
$18,019
$9,893
$9,818
$10,808
$15,000
$9,244
$13,016
Realized capital gains rebounded strongly in 2004/5 but fell sharply in 2006 despite strong stock market as insurers ―bank‖ their gains. Rising again in 2007 as underwriting results slip
$9,701 $6,631 $6,610 $9,125 $8,971 $3,524
$2,880
$4,806
$5,000
$0
-$1,214
-$5,000
Sources: A.M. Best, ISO, Insurance Information Institute.
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
$1,664
$5,997
$10,000
$16,205
Total Returns for Large Company Stocks: 1970-2008*
S&P 500 was up 3.5% in 2007, down 5.45% YTD 2008*
40% 30% 20% 10% 0% -10% -20%
1970 1972 1974
Markets were up in 2007 for the 5th consecutive year; 2008 could be first down year since 2002
1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
*Through May 9, 2008.
Source: Ibbotson Associates, Insurance Information Institute.
2008
-30%
P/C Investment Income as a % of Invested Assets Follows 10-Year US T-Note
P-C Inv Income/Inv Assets
9% 8% 7% 6% 5% 4% 3% 2%
*As of January 2008 month-end. Sources: Board of Governors, Federal Reserve System; A.M.Best; Insurance Information Institute.
10-Year Treasury Note
Investment yield historically tracks 10-year Treasury note quite closely
08*
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
Investment Outlook
• Short-Term: Low interest rates, poor equity market performance will reduce investment gains and depress profitability • Intermediate Term: Fed likely to begin raising rates as early as late 2008, if credit market conditions continue to improve
Stock markets could begin recovery from first quarter lows
• Long-Run: Interest rates and stock market returns are modest • Conclusion: Insurers (including long-tail carriers offering MPLI) cannot count on investment gains to offset underwriting losses • Implication: Insurers Must Remain Disciplined in Terms of Underwriting and Pricing
REINSURANCE MARKETS
Reinsurance Prices are Falling in Non-Coastal Zones, Casualty Lines
Share of Losses Paid by Reinsurers, by Disaster*
70% 60% 50% 40% 30% 20% 10% 0%
Hurricane Hugo Hurricane Andrew Sept. 11 Terror 2004 Hurricane 2005 Hurricane (1989) (1992) Attack (2001) Losses Losses *Excludes losses paid by the Florida Hurricane Catastrophe Fund, a FL-only windstorm reinsurer, which was established in 1994 after Hurricane Andrew. FHCF payments to insurers are estimated at $3.85 billion for 2004 and $4.5 billion for 2005. Sources: Wharton Risk Center, Disaster Insurance Project; Insurance Information Institute.
Reinsurance is playing an increasingly important role in the financing of megaCATs; Reins. Costs are skyrocketing 30% 25%
60% 45%
20%
US Reinsurer Net Income & ROE, 1985-2007*
$9.68
$12 $10
Net Income ($ Bill)
$7.96
Reinsurer profitability rebounded post-Katrina but is now falling
$5.43 $3.71 $4.53 $1.95 $1.94 $3.17 $3.41 $2.51
20% 15% 10%
$8 $6
$1.87 $2.03 $2.52 $1.79 $1.38 $1.22
$1.47
$0.12
$2 $0 ($2) ($4)
$1.17
$1.31
$4
$1.95
$1.99
5% 0% -5%
Net Income
85 86 87 88 89 90 91 92 93
ROE
($2.98)
07* 94 95 96 00 01 02 03 04 05 97 98 99 06
-10%
Source: Reinsurance Association of America. *2007 ROE figure is III estimate based return on average 2007 surplus.
ROE
Reinsurer Market Share Comparison: 1990 vs. 2006
1990
Offshore Reinsurer 35.3%
2006
U.S. Reinsurer 64.7%
Offshore Reinsurer 53.1%
U.S. Reinsurer 46.9%
U.S. Reinsurer market share fell precipitously between 1990 and 2006
Sources: Reinsurance Association of America; Insurance Information Institute.
Regional Distribution of Reinsurers by NWP, 2006
International reinsurers from Germany, Switzerland and France account for 40 percent of global reinsurance volume. Bermuda is a growing market, with a 10 percent share. Lloyd’s and London-based reinsurers account for 6 percent of the world market. Eight countries account for 89 percent of global reinsurance volume.
U.S. 25% Germany 25% Other 11%
Ireland 2% Bermuda 10% Switzerland 12% U.K. 6%
Japan 6%
France Source: Standard & Poor’s, Global Reinsurance Highlights, 2007 Edition 3%
A STORMY ECONOMIC FORECAST
What a Weakening Economy & Credit Crunch Mean for the Insurance Industry
Real GDP Growth*
6% 5%
Economic growth has slowed dramatically in 2007/2008
2.6% 2.8% 09:3Q 2.9% 09:4Q
3.7%
3.1%
4% 3% 2%
3.6%
2.5%
2.9%
3.8%
4.9%
2.1%
0.8%
1.6%
0.6%
0.6%
0%
07:1Q
07:2Q
07:3Q
07:4Q
08:1Q
08:2Q
0.1%
1%
0.6%
08:3Q
08:4Q
1.9%
09:1Q
2.0%
2000
2001
2002
2003
2004
2005
*Yellow bars are Estimates/Forecasts. Source: US Department of Commerce, Blue Economic Indicators 4/08; Insurance Information Institute.
2006
09:2Q
A Few Facts About the Relationship Between Insurance & Economy
• Vast Majority of Insurance Business is Tied to Renewals
Approximately 98+% of P/C business (units) is linked to renewals A very large share of p/c insurance premiums are statutorily or de facto compulsory (e.g., WC, auto liability, surety, usually HO…) P/C insurers have marginal exposure impact due to economy Most life revenues and units are renewals, but some products (e.g., variable annuities are sensitive to market volatility) Life insurers who manage 401(k) assets seeing more loans and hardship withdrawals;
• Insurers are Sensitive to Interest Rates
About 2/3 of P/C invested assets and 75% if Life assets are fixed income Historically, yield on industry portfolios has tracked 10-year note closely All else equal, lower total investment gain implies greater emphasis on underwriting Historically, industry’s best underwriting performances are rooted in periods when interests rates were low and/or equity market performance poor (1930s – 1950s, early 2000s gave rise to strong 2006/07)
Source: Insurance Information Institute.
Real GDP Growth vs. Real P/C Premium Growth: Modest Association
20% 15%
Real NWP Growth
18.6% 20.3%
25%
P/C insurance industry’s growth is influenced modestly by growth in the overall economy
13.7%
8% 6% 4%
10% 5% 0% -5% -10%
5.2% 78 -0.9% 79 80-7.4% 81 -6.5% -1.5% 82 1.8% 83 4.3% 84 85 86 5.8% 87 0.3% 88 -1.6% 89 -1.0% 90 -1.8% 91 -1.0% 92 3.1% 93 1.1% 94 0.8% 95 0.4% 96 0.6% 97 -0.4% 98 -0.3% 99 1.6% 00 5.6% 01 02 7.7% 03 1.2% 04 -2.9% 05 -0.5% 06 -2.9% 07 -2.7% 08F
2% 0% -2% -4%
Real NWP Growth
Real GDP
Sources: A.M. Best, US Bureau of Economic Analysis, Blue Chip Economic Indicators, 2/08; Insurance Information Inst.
Real GDP Growth
Summary of Treasury ―Blueprint‖for Financial Services Modernization
Impacts on Insurers
Treasury Regulatory Recommendations Affecting Insurers
•
Would provide system for federal chartering, licensing, regulation and supervision of insurers, reinsurer and producers (agents & brokers) OFC insurers would still be subject to state taxes, provisions for compulsory coverage, residual market and guarantee funds OFC would specify specific lines covered by charter; Separate charters needed for P/C and Life Ensure safety and soundness Enhance competition in national and international markets Increase efficiency through elimination of price controls, promote more rapid technological change, encourage product innovation, reduce regulatory costs and provide consumer protection
Establishment of an Optional Federal Charter (OFC)
•
OFC Would Incorporate Several Regulatory Concepts
Source: Department of Treasury Blueprint for a Modernized Financial Regulatory System, March 2008.
Treasury Regulatory Recommendations Affecting Insurers (cont’d)
•
Department within Treasury to regulate insurance pursuant to OFC Headed by Commissioner of National Insurance Commissioner has regulatory, supervisory, enforcement and rehabilitative powers to oversee organization, incorporation, operation, regulation of national insurers and national agencies
Department within Treasury to handle issues needing immediate attention such ―reinsurance collateral‖; OIO could focus immediately on ―key areas of federal interest in the insurance sector‖ OIO: lead regulatory voice on international regulatory policy Would have authority to ensure states achieved uniform implementation of declared US international insurance policy goals OIO would also serve as advisor to Treasury Secretary on major domestic and international policy issues Very similar to OIO
Establishment of Office of National Insurance (ONI)
•
Establishment of Office of Insurance Oversight (OIO)
•
UPDATE: HR 5840 Introduced April 17 Would Establish Office of Insurance Information (OII)
Source: Department of Treasury Blueprint for a Modernized Financial Regulatory System, March 2008.
CATASTROPHIC LOSS
No Appreciable Spillover Effects
U.S. Insured Catastrophe Losses*
$ Billions
$120 $100 $80 $60 $40 $20 $0
*Excludes $4B-$6b offshore energy losses from Hurricanes Katrina & Rita. Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B. Source: Property Claims Service/ISO; Insurance Information Institute
$7.5 $2.7 $4.7 $22.9 $5.5 $16.9 $8.3 $7.4 $2.6 $10.1 $8.3 $4.6 $26.5 $5.9 $12.9 $27.5
2006/07 were welcome respites. 2005 was by far the worst year ever for insured catastrophe losses in the US. Few ―spillover effects‖ into non-property lines
$61.9
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08:Q1 20??
$9.2 $6.7 $3.4
$100.0
$100 Billion CAT year is coming soon
Shifting Legal Liability & Tort Environment
Is the Tort Pendulum Swinging Against Insurers?
Bad Year for Tort Kingpins*
―King of Class Actions‖ Bill Lerach •Former partner in class action firm Milberg Weiss •Admitted felon. Guilty of paying 3 plaintiffs $11.4 million in 150+ cases over 25 years & lying about it repeatedly to courts •Will serves 1-2 years in prison and forfeit $7.75 million; $250,000 fine
Source: San Diego Union Tribune, 9/19/07 Source: Wall Street Journal, 3/15/07
―King of Torts‖ Dickie Scruggs •Won billions in tobacco, asbestos and Katrina litigation •Pleaded guilty for attempting to offer a judge $40,000 bribe to resolve attorney fee allocation from Katrina litigation in his firm’s favor. His son/othersguilty on related charges •Could get 5 years in prison, $250,000 fine
Personal, Commercial & Self (Un) Insured Tort Costs*
$250 Commercial Lines Personal Lines Self (Un)Insured
Total = $216.7 Billion
$200
Billions
Total = $159.6 Billion
$45.5
$150
Total = $121.0 Billion
$30.0 $85.6
$100
Total = $39.3 Billion
$20.4 $70.9 $51.0 $85.6 $49.6 1990 $58.7
$50 $5.2 $17.1 $17.0 1980
$0
2000
2006
*Excludes medical malpractice Source: Tillinghast-Towers Perrin, 2007 Update on US Tort Cost Trends.
Tort System Costs, 1950-2009E
$300 $250 2.24% $277 2.24% $265 2.14% $246.0 1.98% $247.0 1.82% 1.83% 1.83% 1.53% 1.87% $179.2 1.34% $158.5 1.22% 1.11% $130.2 1.03% 0.82% $83.7 0.62% $42.7 $20.0 $5.4 $7.9$13.9 $1.8 $3.4 50 55 60 65 70 75 80 85 90 95 00 03 06 08E 09E
2.0%
$200 $150 $100 $50 $0
1.5%
1.0%
0.5%
0.0%
Tort Sytem Costs Tort Costs as % of GDP
Source: Tillinghast-Towers Perrin, 2007 Update on U.S. Tort Costs as % of GDP
Tort Costs as % of GDP
Tort System Costs
After a period of rapid escalation, tort system costs as a % of GDP are now falling
2.5%
The Nation’s Judicial Hellholes (2007)
Watch List
Madison County, IL St. Clair County, IL Northern New Mexico Hillsborough County, FL Delaware California
Some improvement in ―Judicial Hellholes‖ in 2007
NEVADA Clark County (Las Vegas)
ILLINOIS
Cook County West Virginia
NEW JERSEY Atlantic County (Atlantic City)
Dishonorable Mentions
District of Columbia MO Supreme Court MI Legislature GA Supreme Court Oklahoma
TEXAS Rio Grande Valley and Gulf Coast South Florida
Source: American Tort Reform Association; Insurance Information Institute
Business Leaders Ranking of Liability Systems for 2007
New in 2007 Best States 1. Delaware ME, NH, TN, UT, WI 2. Minnesota 3. Nebraska Drop-Offs 4. Iowa ND, VA, SD, WY, 5. Maine ID 6. New Hampshire 7. Tennessee 8. Indiana Midwest/West has 9. Utah mix of good and 10. Wisconsin bad states
Worst States Newly 41. Arkansas Notorious 42. Hawaii AK 43. Alaska Rising 44. Texas Above 45. California FL 46. Illinois 47. Alabama 48. Louisiana 49. Mississippi 50. West Virginia
Source: US Chamber of Commerce 2007 State Liability Systems Ranking Study; Insurance Info. Institute.
Insurance Information Institute On-Line
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