The Effect of Tort Reform on Medical Malpractice Insurance Market Trends

In this article, we examine the extent to which the timing of reforms to the tort liability system coincides with changes in medical malpractice insurance market conditions. Our research is motivated by the fact that, while policy discussions and academic research pertaining to the merits of tort reform often center on ex post effects, it is unclear whether reforms to the tort liability system are responsible for softening conditions in a medical malpractice insurance market that was previously deteriorating. Our analysis of tort reforms in the mid-2000s finds little evidence that state-level medical malpractice insurance losses incurred, premiums earned, or incurred loss ratios were increasing in the years immediately prior to the enactment of various tort reforms, making it difficult to attribute the observed softening of the medical malpractice insurance market that occurred in the mid to late 2000s to the enactment of tort reforms. Our conclusion is that, while tort reforms are effective policy tools for lowering levels of medical malpractice insurance losses incurred and improving insurer profitability, there is little evidence to suggest that reforms are an effective method for softening a medical malpractice insurance marketplace that is otherwise steadily deteriorating.