Medical Malpractice: a critical area for Insurance Companies Venice, 11-12th12th February 2011
Agenda 2 Introduction What happens in Italy? Reasons Focus on Personal Injuries The Insurance Possible solutions Main topics in ART risk
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.
Doctor and DEFENDANT 4
DOCTOR, I LL DENOUNCE YOU! 5
6 Doctors and nurses, errors in the ward
7 Why is it more and more difficult to have an insurance cover for doctors?
8 Rising costs of policies for doctors, with a 400% increase
9 The number of reports for doctors and nurses professional negligence grows exponentially There are 40.000 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 9.567 to 29.597) (*) (*)ANIA l ASSICURAZIONE ITALIANA 2009/2010
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 31/12/2008 1994 16.410 30.212 28.898 29.833 28.421 28.904 1995 14.418 21.464 21.406 22.976 22.488 22.687 1996 16.961 23.253 22.000 21.789 21.622 23.819 1997 25.331 31.082 29.594 29.214 28.961 32.948 1998 17.939 24.517 22.474 30.152 29.966 34.271 1999 22.820 28.144 28.556 32.063 32.571 37.281 Year of registration 2000 22.254254 32.298298 33.887 37.600 37.634 39.968968 2001 21.843 31.675 33.152 36.757 35.974 40.042 2002 20.157 33.026 35.298 39.903 38.490 42.732 2003 30.306 34.379 39.475 39.080 44.521 2004 22.706 29.755 36.545 38.349 44.083 2005 26.670 33.174 35.471 42.383 2006 30.659 33.408 41.476 2007 26.670 38.266 2008 29.505 10
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 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
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 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: 400.000 euro; - infected blood transfusions: 200.000 to 400.000 euro.
WHY DID THAT HAPPEN? 15
Three reasons 16 Social evolution Medical progress Developments in jurisprudence
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
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
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 PERSONAL INJURIES
Civil Code, Jurisprudence, Constitution: Milan tables 21 1942 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)
Non-financial loss - economic developments in personal injuries 22 AGE BRACKETS 20 REFERENCE PERIOD %PD 1996-2009 1996 2009 VARIATION 50 154.000,00 480.000,00 312% 100 510.000,00 1.247.000,00 244% 39 50 128.000,00 430.000,00 336% 100 425.000,00 1.115.000,00 262% 50 50 111.000,00 400.000,00 361% 100 368.000,00 1.040.000,00 000 00 282% ISTAT INDEX: 100 135 35%
Biological loss has increased tenfold compared to inflation 23 COMPARISON BETWEEN VALUES biological loss INCREASE 350 300 330 inflation PERCEN NTAGE OF 250 200 150 100 100 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 REFERENCE YEARS 135
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 636.000* 731.000* + 15% Secondary victims (3 parties entitled) 300.000** 450.000** + 50% Total 936.000 1.181.000181 + 26% 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 160.000 225.000 Total 320.000 450.000 + 40,6%
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 235.000 Moral loss ranging from 1/2 to 1/3 of biological loss 78.402 Financial loss: Expenses for medical assistance and functional recovery from 20.000 to 80.000 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) 150/200.000 Courts also entitle both parents to compensation for starting from about non-financial loss resulting from macro injury 50.000,00.
26 Ex. 2 - Birth loss: 100% perm. dis. Shoulder dystocia with paresis from perinatal asphyxia (100% disability) Non-financial loss (100% PD) 1.100.000 Biological loss adaptation 550.000 Injured party s financial loss 300.000 Parents non-financial loss 500.000000 Relatives non-financial loss 130.000 Assistance expenses 150.000 Total 2009 2.730.000 Legal costs and expert s fees for 2 doctors/criminal 30.000 Legal costs and expert s fees for 2 doctors/civil 30.000000 Counterparty s costs 60.000 3% registration fee on the amount decided Same type of claim in 1990 350.000
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. 725.000,00 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 200.000 min 150.000 max 300.000 Child 150.000x3000 = 450.000000 min 150.000000 and max 300.000000 Sister 75.000 min 20.000 and max 150.000
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
INSURANCE 29
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 FREQUENCY Social evolution Medical progress Developm ents in jurisprude nce AVERAGE CLAIMS COST
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
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.
Criticalities in health liability insurance: Long tail, IBNR 34 1978 (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. 11609/2005 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?
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!
% LOSS RATIO AS OF 31/12/2007 BY REPORTING YEAR IN MEDICAL LIABILITY 36 1994 88% 199 % 1995 89% 182 % 187 1996 85% % 223 1997 85% % 168 1998 80% % 179 1999 69% % 151 2000 63% % 154 2001 54% % 149 2002 43% % 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 39% 29% 23% 15% 6% ANIA- L assicurazione RC Sanitaria LR as of 31/12/2002 LR as of 31/12/2007 238% 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)
Vicious circle 37 CLAIMS COST PREMIUMS 2006 2007 2008 2009 2010
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
Prevention 39 FREQUENCY Prevention Organization Logistics and structure Technology Claim management Informed consent Clinical record AVERAGE CLAIMS COST
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!
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)
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 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 Thank you for your attention Assicurazioni Generali Spa
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
INSURANCE MODEL 46 4th layer MEDMAL VICTIMS FUND 3rd layer REINSURANCE 2nd layer INSURER 1st layer INSURED