the unemployment rate at this level for a long time. So I think there are some concerns or some thoughts out there as to how that might affect say claim frequency prospectively. That’s a hard issue to answer, hard issue to address.
We haven’t seen unemployment at this level for the past 25 years or so. We have to go back to the period of the late 70s, early 80s when we saw unemployment go up from 6% or so in the late 70s to where it peaked in 1982 at approximately 10%. So it really hasn’t been since 1982 where we’ve seen unemployment levels at where they are today It’s interesting to note that if you look back and recall what happened to claims frequency in the early 80s, it did just the opposite of what it did in the last few years, in that claim frequency increased significantly in the early 80s. There’s some data that suggests between 1981 and 1985 that claim frequency might have increased by as much as 50%.
It’s interesting, at least in my view, to note that three years after unemployment spiked at near 10% in 1982, which is the last time it was at the levels it is now, three years after that occurred, the medical professional liability claim frequency also spiked in 1985. I’m not going to necessarily suggest that claim frequency is about ready to increase by 50% again like it did during that time period. But I think it can only add pressure in the upward direction in terms of what might happen prospectively as far as frequency.
That’s might be one of the reasons why we’re seeing a little bit of a bounce in certain markets. Earlier one of the panelists made the interesting point that it’s always difficult, or the challenge is always to try to the inflection points on the curve. These couple of early signs of claim frequency, does that portend that we’re getting there? I’m not sure but it’s certainly something we’re watching very closely in our analyses. So the broader economic environment lends additional pressures to what’s happening specifically within the industry in terms of rate pressures.
McDONALD: I want to just throw this question to Marc Zimmermann and Larry, perhaps you might have this. I don’t know. It’s a number I’m not familiar with at all. It’s a question from an attendee. It says, “What information do panelists have on the frequency of negligent acts as opposed to frequency of claims?” Is that anything that you’re able to watch and learn from? Marc, I’ll start with you. Is that a number that exists and gets reported?
ZIMMERMANN: Not that I’m aware of .
McDONALD: Maybe it’s hospital incidents or something. Larry, is that anything from your work with the Medical Society that you’re familiar with as far as negligent acts that don’t necessarily lead to a claim?
DOWNS: If I understand the question right, it’s tracking negligent acts that don’t ripen into an actual claim?
McDONALD: They’re talking about frequency and the question is whether negligent acts are becoming more frequent, if not necessarily claims. I don’t if there’s anything that’s reported.
DOWNS: I actually thing Dr. Anderson touched on that briefly with some great insight. From what I’m hearing from our membership, there is a real increase in what would be called defensive medicine in some circles or maybe patient safety awareness, use of lots of technology, fetal monitors, additional consults and testing to avoid misdiagnosis. I would not agree that there’s an increase in negligent acts that don’t rise into claims, and that would be affecting frequency. I think it’s just the opposite. Physicians are much more aware and have a real heightened awareness based on the crisis we were in 2002 and 2003, where one claim could mean whether you were insurable or not. So those memories are fresh in the minds of lots of physicians and I would think that the exact opposite would be true.
ZIMMERMANN: To add to that, we are seeing physicians evaluating the overall risk management of their practices with the goal of improving patient safety overall.
McDONALD: Let’s just start with Henry. The question is are there any thoughts you want to leave people with? Any key points to make at this point?
WITMER: Thank you. From a number of things that I’ve heard and certainly from what we hear in our rating meetings and discussions is that despite the soft market conditions and the pricing competition that exists, really at the end of the day each insurance company needs to utilize their enterprise risk management processes and programs to determine what are their strengths and what are their weaknesses, both today and as well as what they might be going forward if the soft market conditions continue. How are they going to build on those strengths? What are they doing now to address those weaknesses? Are they prepared if the soft market conditions continue and rates continue to decline? How are they going to be able to cope and be able to manage their organizations and still be able to continue to offer their services to their insureds as they have been doing and that’s been exemplified in the high retention ratios that they’ve been experiencing over the years. At what point are they going to walk away from a price and still maintain viability for their organization?
TURNER: In terms of tort reform, nothing much is going on anywhere, at the federal or the state level. Most of it, the significant tort reform measures are more than five years old now and they’ve had their chance to either