1 Medical Malpractice: a critical area for Insurance Companies Venice, 11-12th12th February 2011
2 Agenda 2 Introduction What happens in Italy? Reasons Focus on Personal Injuries The Insurance Possible solutions Main topics in ART risk
3 Introduction 3 Medical Malpractice is a common trend in all developed countries, although it has distinctive features in each country. This presentation will provide an in-depth analysis on its impact on the Italian insurance market.
4 Doctor and DEFENDANT 4
5 DOCTOR, I LL DENOUNCE YOU! 5
6 6 Doctors and nurses, errors in the ward
7 7 Why is it more and more difficult to have an insurance cover for doctors?
8 8 Rising costs of policies for doctors, with a 400% increase
9 9 The number of reports for doctors and nurses professional negligence grows exponentially There are reports every year for doctors and nurses professional negligence Between 1994 and 2008, the number of claims reported to Companies for med-mal insurance tripled (from to ) (*) (*)ANIA l ASSICURAZIONE ITALIANA 2009/2010
10 Compensations for doctors liability increase Over ten years compensations for medical negligence have increased tenfold and the average cost of claims has continued to rise As at 31/12/2002 As at 31/12/2004 As at 31/12/2005 As at 31/12/2006 As at 31/12/2007 As at 31/12/ Year of registration
11 11 Costs for doctors and hospitals are soaring Italian doctors and hospitals spend over 500 million euro every year to have an insurance coverage Increasingly higher deductibles for the insured are introduced in insurance policies Restrictions in the policy terms and conditions are introduced
12 12 Sharp exit of Italian companies, entry of foreign competitors, deserted tenders, self-insurance The number of insurance policies cancelled about individual doctors and hospitals increases Public Hospitals in important regions such as Tuscany and Marche have now resorted to self- insurance
13 Statistics in Italy 13 MEDICAL ERRORS MAINLY OCCUR IN: Operating theatre: 32% Hospital wards: 28% Emergency Department/First aid: 22% Surgery: 18% CLAIMS MADE FOCUS ON THE FOLLOWING SECTORS: Orthopaedics and Traumatology: 16.5% Oncology: 13% Obstetrics and Gynecology: 10.8% General surgery: 10.6%. Technical Commission on Clinical Risk (Ministry of Health)
14 14 The most expensive cases for insurance companies are: - births with babies total disability: 2 to 4.5 million euro; - diagnostic failure of mortal cancer: 1 million euro; - serious orthopedic injuries: euro; - infected blood transfusions: to euro.
15 WHY DID THAT HAPPEN? 15
16 Three reasons 16 Social evolution Medical progress Developments in jurisprudence
17 Social evolution 17 Focus on the individual is a priority value Patients are increasingly aware of their rights Bodies and associations protecting the sick Negative evolution of the doctor-patient relation Attention (often too much) to medical malpractice cases by the media
18 Scientific medical progress 18 From the treatment of the sick to the treatment of the healthy Increasingly sophisticated diagnostic techniques give risk a dynamic effect Various and complex measures taken by several healthcare workers imply joint and several liability rather than personal liability resulting from individual actions
19 Developments in jurisprudence 19 Review of Article 2236 of the Italian Civil Code by jurisprudence Less stringent rules on the establishment of causation Burden of proof reversed (in favor of the alleged injured party) From obligation of means to obligation of results (cosmetic surgery, implantology) From extra-contractual liability to contractual liability (limitation periods, burden of proof, compensation losses) Introduction of new types of medical liability: e.g. informed consent, staff liability. Personal injuries
20 20 PERSONAL INJURIES
21 Civil Code, Jurisprudence, Constitution: Milan tables Civilil Code: PECUNIARY LOSSES AND NON-PECUNIARY LOSSES Jurisprudence: MULTIPLICATION OF LOSSES GIVING RIGHT TO COMPENSATION Biological loss Moral loss Psychic loss Reputation ti loss Existential loss.. Introduction of Milan tables : FROM EQUITABLE CRITERIA TO MILAN TABLES (continuous update of increasing values)
22 Non-financial loss - economic developments in personal injuries 22 AGE BRACKETS 20 REFERENCE PERIOD %PD VARIATION , ,00 312% , ,00 244% , ,00 336% , ,00 262% , ,00 361% , , % ISTAT INDEX: %
23 Biological loss has increased tenfold compared to inflation 23 COMPARISON BETWEEN VALUES biological loss INCREASE inflation PERCEN NTAGE OF REFERENCE YEARS 135
24 Court of Milan Tables - examples of increase in compensation 24 Macro injuries Assumption: 40-year-old person with 70% permanent disability, alteration in living habits and family life (spouse and two live-in children) Non-financial loss primary victim + secondary victims 2008 Tables 2009 Tables % variation Primary victim * * + 15% Secondary victims (3 parties entitled) ** ** + 50% Total % Death loss * Maximum value ** Total amount for the 3 parties entitled Assumption: non-financial loss in favor of live-in parents (50 year olds) for the death of the live-in sixteen-year-old child Non-financial loss secondary victims 2008 Tables 2009 Tables % variation Each parent Total ,6%
25 25 Ex. 1 - Birth loss: 35% perm. dis. Inadequate assistance to woman in labor during delivery (2009); bad manoeuvres by the medical staff have caused shoulder dystocia in the newborn baby Biological loss 35% permanent disability and temporary disability Moral loss ranging from 1/2 to 1/3 of biological loss Financial loss: Expenses for medical assistance and functional recovery from to Whatever else may be paid for losing future working chances; if recognised by the adjuster, the loss is estimated according to the parents professions (this amount is highly variable) 150/ Courts also entitle both parents to compensation for starting from about non-financial loss resulting from macro injury ,00.
26 26 Ex. 2 - Birth loss: 100% perm. dis. Shoulder dystocia with paresis from perinatal asphyxia (100% disability) Non-financial loss (100% PD) Biological loss adaptation Injured party s financial loss Parents non-financial loss Relatives non-financial loss Assistance expenses Total Legal costs and expert s fees for 2 doctors/criminal Legal costs and expert s fees for 2 doctors/civil Counterparty s costs % registration fee on the amount decided Same type of claim in
27 27 Ex. 3 - Loss with patient s death Considerable delay in identifying the causes of cardiac decompensation. Responsible for patient s death due to cardiovascular arrest for proven failure in providing prompt medical and surgical treatment and lack of instrumental tests ,00 is the average value of non-financial losses given to the heirs (wife, three children and a sister) according to the tables followed by the competent Court (Milan). In the legal proceedings, this amount is adapted on a case-by-case basis according to kinship. Wife min max Child x3000 = min and max Sister min and max
28 Secondary victims and macro injuries 28 Introduction of the concept of secondary victim, first and foremost the injured party s closest relatives. Not only first- and second-degreedegree relatives, but also cohabitants and live-in relatives (e.g. cousin). Gradual increase in the range of people having right to compensation Autonomous right of compensation extended to secondary victims not only in the event of death, but also for macro injuries Progressive development of the concept of macro injury: 100% permanent disability (in the past) versus 30% permanent disability (now) + Significant increase in compensation values
29 INSURANCE 29
30 30 INSURANCE PREMIUM FREQUENCY PROBABLE OCCURRENCE OF A CLAIM x AVERAGE CLAIMS COST POTENTIAL AVERAGE VALUE OF THE LOSS ACTUARIAL AND STATISTICAL PROJECTIONS PURE INSURANCE PREMIUM + management costs + safety margin + intermediation fees + Taxes (22.25% 25% in Italy) = TOTAL INSURANCE PREMIUM
31 31 FREQUENCY Social evolution Medical progress Developm ents in jurisprude nce AVERAGE CLAIMS COST
32 Statistical and actuarial projection 32 JURISPRUDENCE PROVIDING COMPENSATION FOR LOSSES THAT IN THE PAST WERE NOT COMPENSATED NEW TYPES OF LOSSES HAVING AN IMPACT ON FREQUENCY THE WIDE DISCRETIONARY POWER OF JUDGES IN DECIDING COMPENSATION AMOUNT INFLUENCES THE AVERAGE COST THE TWO REQUIREMENTS (FREQUENCY AND AVERAGE ( CLAIMS COST) CAN HARDLY BE ESTIMATED AS THEIR EVOLUTION IN TIME IS NOT REGULAR
33 Criticalities in MED-MALMAL liability insurance: Long tail, IBNR 33 LONG TAIL NATURE OF CLAIMS Claim formation: CAUSE OF THE LOSS - OCCURENCE OF THE EVENT - STATEMENT OF CLAIM TO THE PERSON CLAIMED TO BE LIABLE - REPORT TO THE INSURER - ASSESSMENT - SETTLEMENT Example 1978: blood transfusion after a road accident. 2005: patient is found TBC marker positive during a blood test. 2009: statement of claim to the insured party (hospital). 2010: report to the insurer by the insured. 2010: out-of-court of claim settlement.
34 Criticalities in health liability insurance: Long tail, IBNR (underwriting year): NON CHARGEABLE CLAIM Law 210/1992 compensation for damage resulting from irreversible complications following compulsory vaccination, transfusions and blood product administration: THE CLAIM CANNOT BE SETTLED; THE STATE BEARS THE COSTS OF FAIR COMPENSATION Ruling no /2005 by the Court of Cassation acknowledges both the right to fair compensation (under law no. 210 of 1992) and the right to claim settlement by the Ministry of Health under Article 2043 of the Italian Civil Code: THE CLAIM CAN BE SETTLED IN 1978, HOW COULD THE UNDERWRITER FORESEE THIS EVOLUTION AND ESTIMATE A BALANCED PREMIUM?
35 Criticalities in health liability insurance: Long tail, IBNR 35 IN 1978 THE UNDERWRITER HAD TO FORESEE: A CLAIM REFUNDABALE AFTER 32 YEARS SINCE DATE OF UNDERWITING YEAR AND CONSEQUENTLY TO ESTIMATE (32 YEARS AGO) THE RIGHT RESERVE TO COVER THE ABOVE MENTIONED CLAIM IBNR Losses = (incurred but not reported) reserve covering the estimated cost of losses incurred but not yet reported to the Insurer. MISSION IMPOSSIBLE!
36 % LOSS RATIO AS OF 31/12/2007 BY REPORTING YEAR IN MEDICAL LIABILITY % 199 % % 182 % % % % % % % % % % % % % % % % 29% 23% 15% 6% ANIA- L assicurazione RC Sanitaria LR as of 31/12/2002 LR as of 31/12/ % 202% 187% 206% 192% 192% 162% 150% 155% 157% 140% 286% 284% 246% The loss ratio of claims assessed in 2002 increased in 2007 (5 years later)
37 Vicious circle 37 CLAIMS COST PREMIUMS
38 Different relation between the insurer and the insured 38 Insured Insurance Insurance and Insured Collaboration and Cooperation Insurance is not an alternative to prevention but rather a complement
39 Prevention 39 FREQUENCY Prevention Organization Logistics and structure Technology Claim management Informed consent Clinical record AVERAGE CLAIMS COST
40 Assicurazioni Generali: strategy 40 CAREFUL RISK UNDERWRITING CONSULTING SERVICES CONTINUOUS MONITORING OF POSITIONS LOSS PREVENTION CLAIM SETTLEMENT DEPARTMENTS FOCUSING ON HEALTH LIABILITY THESE MEASURES HAVE NOT BEEN SUFFICIENT!
41 Possible solutions 41 Legislative measures Healthcare facilities Doctor Better relation with the patient and greater attention to informed consent Compulsory LOSS PREVENTION measures in HEALTHCARE FACILITIES (local health authorities, clinics, health centers) and RISK MANAGEMENT Setting up of a fund for healthcare victims Common limitation periods Introduction of caps for personal injuries or rules envisaging insurance in excess of loss only Tax reduction on premiums (22.25%) MANDATORY ATTEMPT OF OUT-OF-COURT SETTLEMENT (Leg. Decree 28/2010)
42 Main topics in ART risk 42 High potential of loss in personal injuries Time span between the occurrence of the event and its manifestation: risk of development of unforeseen deseases compared with the actual scientific knowledge Personal profile of the injured party, whose expectations are very high Potential lasting damage involving the whole household for all their life Risk of business purposes prevailing on ethical and social purposes
43 43 BASIC REQUIREMENTS FOR THE INSURABILITY OF THE RISK DOMESTIC AND/OR INTERNATIONAL STATISTICS/DATA BASE REGULAR FORESEEABLE MEASURABLE RISK MANAGEMENT MODELS AND LOSS PREVENTION ACTIVITIES DIFFERENTIATED APPROACHES RELATED TO FACILITIES DIMENSION ACCESS TO INSURANCE CONTINUING CARE NEEDS INFORMED CONSENT
44 44 Thank you for your attention Assicurazioni Generali Spa
45 INSURANCE MODEL Medmal victims fund 45 FED BY Share of tax (22,25% ex. 12,5%) Fee for each treatment by patients Contribution by medical associations CAPS FOR PERSONAL INJURIES Legislative measures INFORMED CONSENT MODELS ADOPTION OF BEST STANDARD PROCEDURES LIMITED PRESCRIPTION
46 INSURANCE MODEL 46 4th layer MEDMAL VICTIMS FUND 3rd layer REINSURANCE 2nd layer INSURER 1st layer INSURED