The Distribution of the Insurance Market Effects of Tort Liability Reforms

Harvard Law School, John M. Olin Center for Law, Economics & Business, Discussion Paper No. 243

Posted: 25 Feb 1999

See all articles by Patricia Born

Patricia Born

Florida State University - College of Business; Florida State University - College of Business; Florida State University - College of Law; California State University, Northridge - Department of Finance, Real Estate, & Insurance

W. Kip Viscusi

Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - College of Arts and Science - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics

Date Written: October 1998

Abstract

This paper considers the effect of tort liability reforms on medical malpractice and general liability insurance markets. The primary reforms analyzed were damages caps and other liability reforms. These reforms decreased premiums, reduced losses, and improved the profitability of insurance companies based on evidence using detailed individual company by state data from the National Association of Insurance Commissioners. Liability reforms reduce losses by much more than they diminish premiums. Moreover, the increase in profitability is concentrated disproportionately among the least profitable firms in the industry, thus limiting the role of competition in promoting the pass-through of cost reductions during this sample period.

JEL Classification: G21, G28

Suggested Citation

Born, Patricia H. and Born, Patricia H. and Viscusi, W. Kip, The Distribution of the Insurance Market Effects of Tort Liability Reforms (October 1998). Harvard Law School, John M. Olin Center for Law, Economics & Business, Discussion Paper No. 243, Available at SSRN: https://ssrn.com/abstract=150548

Patricia H. Born

Florida State University - College of Business ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States

Florida State University - College of Business ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States

Florida State University - College of Law

425 W. Jefferson Street
Tallahassee, FL 32306
United States

California State University, Northridge - Department of Finance, Real Estate, & Insurance ( email )

Northridge, CA 91330-8379
United States

W. Kip Viscusi (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-343-7715 (Phone)
615-322-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/bio/?pid=w-kip-viscusi

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Vanderbilt University - College of Arts and Science - Department of Economics

Box 1819 Station B
Nashville, TN 37235
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://as.vanderbilt.edu/economics/bio/wkip-viscusi/

Vanderbilt University - Owen Graduate School of Management

401 21st Avenue South
Nashville, TN 37203
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://business.vanderbilt.edu/bio/w-kip-viscusi/

Vanderbilt University - Strategy and Business Economics

Nashville, TN 37203
United States

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