Question

From the same Texas Department of Insurance data on closed claims for medical malpractice liability insurance referred to in Problem 1, we can estimate the number of claims in each year of injury that will be closed in the next 16 years. We obtain the following data. Here the estimated dollars per claim for each year have been adjusted to 2007 dollars to account for inflation, so the values are all compatible. Texas was said to have had a “medical malpractice liability crisis” starting in about 1998 and continuing until the legislature passed tort reforms effective in September 2003, which put caps on certain noneconomic damage awards. During this period premiums increased greatly and doctors left high-risk specialties such as emergency room service and delivering babies, and left high-risk geographical areas as well causing shortages in doctors in certain locations. The data from 1994 until 2001 is the following:

Injury year	Estimated # claims	Estimated $ per claim
1994	1021	$415,326.26
1995	1087	$448,871.57
1996	1184	$477,333.66
1997	1291	$490,215.19
1998	1191	$516,696.63
1999	1098	$587,233.93
2000	1055	$536,983.82
2001	1110	$403,504.39

1. Calculate the mean or average number of claims per year for medical malpractice insurance in Texas over the four-year period 1994–1997.
2. Calculate the mean or average number of claims per year for medical malpractice insurance in Texas over the four-year period 1998–2001.
3. Calculate the mean or average dollar value per claim per year for medical malpractice insurance in Texas over the four-year period 1994–1997 (in 2009 dollars).
4. Calculate the mean or average dollar value per claim per year for medical malpractice insurance in Texas over the four-year period 1998–2001 (in 2009 dollars).
5. Looking at your results from (a) to (e), do you think there is any evidence to support the conclusion that costs were rising for insurers, justifying the rise in premiums?

Answer 1

Ans- (a)The mean or average claims per year for medical malpractice insurance in Texas over the four-year period 1994-1997 would be calculated by adding all the claims made during 4 years divided by the number of years.

(Mean or Average = Sum of all the claims/ number of years)

=(1021+1087+1184+1291)/4 =1145.75.

(b) Mean or average claims per year over 1998-2001

= (1191+1098+1055+1110)/4 =1113.50

Dollar per value claim over the period is given below in the table

year	Estimated Claims	Estimated $ claims	$ per value claim=Estimated $ claims/Estimated claims
1994	1021	415326.26	406.78
1995	1087	448871.57	412.94
1996	1184	477333.66	403.15
1997	1291	490215.19	379.72
1998	1191	516696.63	433.83
1999	1098	587233.93	534.82
2000	1055	536983.82	508.99
2001	1110	403504.39	363.52

(c) The average dollar per claim per year over the period of 1994 to 1997

= (406.78+412.94+403.15+379.72)/4= $400.64.

(d) The average dollar per claim per year over the period from 1998 to 2001.

= (433.83+534.82+508.99+363.52)/4 = $460.29.

(e) There is not any specific evidence been found in the answers which support the conclusion that costs were rising for insurers, justifying the rise in premium. dollar per value is randomly decreasing and increasing in certain years, there are no trends associated with it.