Pitfalls in Evaluating Proposed Tort Reforms

Motivation: To provide the ratemaking actuary with a description of typical medical malpractice tort reforms and issues involved in pricing these reforms.

Method: The paper draws primarily on the author’s own experience with reform legislation.

Results: Ten pitfalls in evaluating reforms are described.

Conclusions: For educating non-actuaries, the most important is Pitfall #8, relating to the difference between indemnity savings and the expected change to current rates. Actuaries pricing malpractice tort reforms should be aware of the issues underlying all ten pitfalls. Some of these issues may also be relevant to pricing reforms for other lines of insurance.

Keywords: Ratemaking; medical malpractice; tort reform.