Some Statistical Evidence on Merit Rating in Medical Malpractice Insurance

Merit rating is not widely used in setting medical malpractice insurance premiums. A statistical analysis of two different datasets shows that actual malpractice claims experience is inconsistent with the notion that claims occur randomly among physicians within each specialty class. Consequently, a statistical model allowing physician specific claims propensities is fit to a recent dataset. Calculations using this model indicate that the additional effect of four years of a physician's claims experience on his or her expected claims rate is comparable to the effect of knowing the physician's medical specialty. Consequently, merit rating deserves more serious attention in medical malpractice insurance.