Reducing Medical Malpractice Loss Reserve Volatility Through Tort Reform

Patricia H. Born, Evan M. Eastman and W Viscusi

North American Actuarial Journal, 2020, vol. 24, issue 4, 626-646

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.

Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10920277.2020.1733616 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:uaajxx:v:24:y:2020:i:4:p:626-646

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/uaaj20

DOI: 10.1080/10920277.2020.1733616

Access Statistics for this article

North American Actuarial Journal is currently edited by Kathryn Baker

More articles in North American Actuarial Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().