Influences of Organizational Structure and Diversification on Medical Malpractice Insurer Performance

Prior literature has indicated some advantage to physician-directed insurers in the medical malpractice insurance market (Lei and Browne, 2008, and Lei and Schmit, 2008, 2010). We anticipate that these advantages lead to enhanced financial performance, and test that hypothesis. We note, however, tha...

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Bibliographic Details
Published inJournal of insurance issues Vol. 33; no. 2; pp. 152 - 177
Main Authors Lei, Yu, Schmit, Joan T.
Format Journal Article
LanguageEnglish
Published Northridge Western Risk and Insurance Association 01.10.2010
Western Risk & Insurance Association
Subjects
Diversification
Health care
Health insurance
Hypotheses
Insurance coverage
Insurance industry
Insurance markets
Insurance premiums
Insurance providers
Liability insurance
Medical malpractice
Medical malpractice insurance
Multiline insurance
Organizational structure
Product diversification
Professional liability insurance
Property liability insurance
Reinsurance
Risk retention
Specialization
Stocks
Studies
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Summary:Prior literature has indicated some advantage to physician-directed insurers in the medical malpractice insurance market (Lei and Browne, 2008, and Lei and Schmit, 2008, 2010). We anticipate that these advantages lead to enhanced financial performance, and test that hypothesis. We note, however, that physician-directed insurers tend to be highly specialized both in product line and geography, generating the vast majority of their premium volume from medical malpractice liability insurance in one or just a few states. The advantages of physician-directed insurers could be due to such specialization and concentration, or perhaps be independent of those characteristics. We report our tests of the hypothesis that organizational form, product specialization, and geographic concentration of medical malpractice insurers affect their financial performance. Our results indicate that product diversification is positively related to financial performance. Furthermore, holding product diversification constant, we also find that physician directed insurers show enhanced performance over other organizational forms.
ISSN:1531-6076
2332-4244