Insurer dropping malpractice

JEFFERSON CITY, Mo. — Farmers Insurance Group said Wednesday that it will stop selling medical malpractice insurance, narrowing an already tight market for physicians in some of the 18 states that it serves, including Utah.

Farmers Insurance has "suffered significant underwriting losses" recently and plans to refocus on its core lines of home, business, auto and life insurance, said Michelle Levy, a spokeswoman for the Los Angeles-based insurance group.

Farmers Insurance stopped writing new medical malpractice policies Friday and plans to halt renewals on Jan. 1, subject to the approval of insurance regulators in each state. The insurance group has active malpractice policies valued at $94.5 million — down sharply from the $231 million in premiums it had last year, Levy said.

In 2002, Farmers Insurance lost more than $100 million on its malpractice policies; losses this year were following a similar trend, she said.

The national market for medical malpractice insurance got squeezed significantly in December 2001, when St. Paul Cos. — then the second largest provider — announced it would stop writing such policies. Other smaller insurers also have cut back or dropped out of the malpractice business.

"This is a growing and pervasive trend," said Steve Schneider, a vice president for the American Insurance Association. "We don't see any insurers who are very excited about medical malpractice insurance."

Roughly one-third of the Farmers Insurance malpractice premiums are in California, where it first started offering the policies 49 years ago. But its largest market share of almost 24 percent is in Hawaii. It also held more than 10 percent of the medical malpractice market in Oregon, Idaho and Missouri last year, Levy said.

Farmers Insurance is owned by the Swiss insurance giant, Zurich Financial Services, and sells medical malpractice policies under several names, including Truck Insurance Exchange, Mid-Century Insurance Co. and Texas Farmers Insurance Co.

Executives from the insurance group have been meeting with state insurance regulators during the past week to explain their decision to drop out of the medical malpractice sector.

A letter hand-delivered Tuesday to the Missouri Insurance Department says the medical malpractice policies, which are written on an annual basis, will expire over the next 15 months.