Merit Rating for Physicians' Malpractice Premiums

Using medical malpractice claims data from the Medical Inter-Insurance Exchange of New Jersey, which insures approximately 70 percent of the physicians practicing in the state, this Note analyzes physician negligence. Of the three aspects of the physician's claims history that might be used either alone or in combination — (1) the total number of claims filed against a physician including both paid and unpaid claims (where "unpaid" claims are those for which no indemnity payment is made in the settlement or verdict); (2) the number of paid claims; and (3) the average amount of the indemnity paid on each claim (claims severity) — the author decided to measure an individual's negligence solely by the number of paid claims. He finds evidence that physicians vary widely in their proneness to generate paid claims, but that individuals' claims histories are only moderately accurate in identifying more vs. less claims-prone physicians. This finding limits the potential of deterrent policies that use past claims to target individual physicians.