Relates to the conversion of domestic reciprocal medical malpractice insurers and the premium rates and surcharges for medical malpractice insurance

Summary of provisions

This bill permits domestic medical malpractice insurers to adjust their premium rates up to an aggregate of plus or minus five percent without prior regulatory approval, permit domestic reciprocal medical malpractice insurers that provide coverage to teaching physicians and dentists to convert more easily to domestic stock insurance companies, authorizes the superintendent of financial services to impose surcharges in the event the Medical Malpractice Insurance Pool has an actuarially projected deficiency for policy year's through June 30, 2015, and requires the Property/Casualty Insolvency Fund to apply to policies issued by the Medical Malpractice Insurance Pool.

Existing law

The insurance law currently requires the superintendent of financial services to establish all medical malpractice insurance premium rates, requires domestic reciprocal insurers to obtain a super majority approval of its subscribers to convert to a domestic stock company, and places the burden of any projected deficiency of the Medical Malpractice Insurance Pool solely on the member companies of such pool notwithstanding that they were mandated by law to become its members.

Justification

The current business environment for medical malpractice is very restrictive of competition and innovation. Small reciprocal insurers in particular are constrained by their governing structure in their ability to take advantage of business opportunities without time consuming and expensive subscriber approval. The value of the subscribers' equity in such a company is zero or close to zero because of a history of operating deficits. The proposed legislation will permit a reciprocal insurer that writes medical malpractice insurance for teaching staff at SUNY and other academic facilities to convert to stock companies without subscriber approval, but with oversight of the

Department of Financial Services. The revised procedures will improve competition in the marketplace and improve carrier solvency.

Legislation enacted in 1986 provided that the superintendent of insurance is required to establish medical malpractice insurance premium rates. Over the quarter century since the legislation was enacted, private carrier's have left the market and competition among the few remaining carriers is very limited. The proposed legislation will encourage competition and improve carrier solvency by permitting insurance carriers that write medical malpractice insurance to adjust their rates for different medical specialties, and in differing geographical territories, provided that the overall effect does not increase or decrease their rates by more than five percent in the aggregate. In addition to increasing competition, this bill will address the regulatory delays and burden to the state that arises from the current legislation.

The legislation enacted in 2001 to dissolve the Medical Malpractice Insurance Association ("MMIA") continued the authority of the superintendent of insurance to impose premium surcharges on physicians and surgeons who were insured by MMIA in the event of an actuarially projected deficiency attributable to the premium levels for policies providing coverage for physicians and surgeons medical malpractice prior to July 1, 2001, but did not provide for such surcharges in the event of a deficit attributable to the MMIA's successor, the Medical Malpractice Insurance Pool ("MMIP"). The proposed legislation clarifies that the superintendent of financial services shall have authority to impose surcharges in respect of policies issued by MMIP through June 30, 2015, and also clarifies that if such surcharges are inadequate to meet any deficit in the MMIP the Property/Casualty Guaranty Fund will be primarily responsible to cover unpaid claims before the individual member companies of MMIP will be exposed to liability. The proposed legislation will have create an immediate benefit to the financial condition of the members of the MMIP, some of which are experiencing financial distress in part due to their MMIP potential exposure.

Legislative history

S.7388 of 2013 - Referred to Insurance S.971 of 2014 - Referred to Insurance

Fiscal implications

None.

Effective date

Effective immediately.