Medical Malpractice Liability

1. Medical Malpractice Liability • Current Reserving Challenges • for Captives and Self Insurers Alice Edmondson (CASCO)

2. Current Reserving Challenges • Program Structure • Client Influences • Outside Influences

3. Program Structure - Challenges • Expanded retentions from hard markets • Reactivation of captives • Dramatic increases in per claim limits • Disappearance of shared aggregates

4. Program Structure - Challenges • Coverage complexities • Varying effective and retro dates • Coverage and limits differences • Occurrence and claims made mixtures

5. Program Structure - Suggestions • Create a program structure matrix first! • All coverages (HPL, IPL, GL, PPL,…) • Coverage basis (occ, claims made,…) • Effective and retro dates • Limits and whether LAE is inside • Variations by covered entity • Agreement by client, captive mgr, broker

6. Program Structure – Sample Matrix

7. Program Structure - Suggestions • Don’t over-simplify projection process! • Do occurrence and report year analysis • Start refined, aggregate later • Emphasize good increased limits analysis

8. Client Influences - Challenges • More risk than ever • Nursing and physician staff shortages • Expanded corporate entity exposure • New procedures and ancillary activities • Client unawareness of own exposures

9. Client Influences - Challenges • Management needs /expectations • Distorted CFO expectations • Continued cost pressure on providers • Problems created by huge P/L swings

10. Client Influences - Challenges • Data problems • Inconsistent / incomplete exposure • Physician specialty “downgrading” • Incomplete loss and LAE reporting • Various claim histories / TPAs

11. Client Influences - Suggestions • Communicate early and often • Initiate a “what’s happening” discussion • Be a pest -- don’t accept incomplete or questionable data • Provide early warning of bad news

12. Client Influences - Suggestions • Reconcile claims and financial data ASAP • Large claims paid after valuation date • Incomplete recording of LAE • Don’t accept a big discrepancy!

13. Client Influences - Suggestions • Consider enhanced risk factors • Explicit exposure values • Percentage loads • Using appropriate conservatism at key judgment points

14. Outside Influences - Challenges • Claim severity • Significant upward trends recently • Deteriorating venues • Claim reserving reactions

15. Outside Influences - Challenges • Other Factors • Nursing home liability problems • Existing and possible future legislation

16. Outside Influences - Suggestions • Amass good information • Comprehensive claims database • Relevant industry data • Read and listen a lot!

17. Outside Influences - Suggestions Don’t ignore trends but Don’t over-react!