FOR IMMEDIATE RELEASE:
April 28, 2003

FOR INFORMATION CONTACT:
Suzanne Nelson at (312) 580-2443

ISMIE MUTUAL ANNOUNCES 35.2 PERCENT BASE RATE HIKE FOR PHYSICIAN
MEDICAL MAPLRACTICE INSURANCE; CITES STATE’S DETERIORATING
CIVIL JUSTICE CLIMATE AS CAUSE.

Chicago, IL -- ISMIE Mutual Insurance Company, the state’s largest writer of medical liability insurance coverage for physicians, today announced an annual base rate increase of 35.2 percent for its 14,000-plus policyholders, effective with the July 1, 2003 policy year. Letters to policyholders detailing the increase are in the mail this week. Founded, owned and operated by physicians, ISMIE Mutual has been insuring doctors in the Illinois marketplace continuously since its founding in 1976.

“We realize the enormous burden this poses for policyholders and their patients, and we deeply regret that the deteriorating civil justice climate left us little choice but to act,” stated Harold L. Jensen, M.D., ISMIE Mutual chairman. “The physicians on ISMIE’s Board looked at every possible way to minimize this increase. However, in the last two years, the company’s average payout per claim climbed 59 percent to $612,000. The number of reported cases jumped 36 percent over the last nine months alone. We cannot sustain these loss trends without raising premiums substantially.”

In addition to the base rate increase, the market environment is forcing ISMIE to significantly reduce existing discounts afforded policyholders. This means some physicians will experience premium hikes well in excess of 35 percent. The company already has imposed a moratorium on new business, which took effect January 1, 2003. In 2002, ISMIE had taken in approximately 2000 new policyholders as several commercial carriers exited the Illinois market. “We want to serve Illinois physicians, but we have topped out on our financial resources available to write new business,” explained Dr. Jensen.

ISMIE has ably weathered several insurance crises since its inception in the mid 1970s, when commercial carriers imposed triple-digit rate hikes and pulled out of Illinois altogether. According to Dr. Jensen, “ISMIE’s mission is to provide a strong and stable source of medical liability coverage for doctors, and for patients injured through medical negligence. Our philosophy of operation has been a conservative one, charging only the rate level we need to preserve the security of future claims pay-outs for physicians and patients. The company’s non-profit roots and physician ownership mean we do whatever we can to keep policyholder costs to a minimum. Only two percent of ISMIE’s investment portfolio is comprised of equity holdings; thus, rates are only minimally affected by the ups and downs of the stock market.”

“The cost driver in medical liability is non-economic damage awards,” continued Dr. Jensen. “What’s needed is a proven solution, a reform law similar to that adopted in California some years ago. It protects patients by giving them full and unlimited compensation for all their economic losses due to injury through medical negligence. At the same time, it caps at $250,000 the unpredictable category of non-economic damage awards such as for pain and suffering.”

Over the last 30 years, ISMIE Mutual has been on the forefront of efforts to reform Illinois’ medical liability environment, which has been trending toward huge, lottery-like plaintiff verdicts. Three times running, Illinois physicians have been disappointed when the state’s high court overturned hard-won reforms adopted by the General Assembly. ISMIE Mutual is urging physicians and patients statewide to call on Congress to enact a $250,000 cap on noneconomic damage awards, as embodied in H.R. 5 and S. 607. “ISMIE Mutual has a strong record of sound management and fairness. What we need to solve this crisis is a similar philosophy in the civil courts.”

www.ismie.com

ISMIE Mutual is a physician-owned and operated insurer writing medical liability coverage
statewide for 14,000 policyholders in all specialties. Dr. Jensen is an internal medicine
specialist from Frankfort.

Facts and Statistics: ISMIE Mutual Base Rate Increase, July 1, 2003

• In the last 2 years, ISMIE’s average payment to plaintiffs per claim has increased 59 percent, growing from $385,000 to $612,000.

• Over the last nine months alone, the number of claims reported to ISMIE grew by 36%. This is in stark contrast to previous years when frequency growth was flat.

• According to ISMIE estimates, an “average” physician in an “average” risk specialty can expect to be sued about once every 10 years. For high risk physicians that ratio increases dramatically: an “average” obstetrician can expect a lawsuit bi-annually.
  

• From 1997 through 2002, the average total jury verdict rose 61 percent. Over that same period the average jury award for non-economic damages increased 132 percent. (based on data from Cook County Jury Verdict Reporter)

• In 1997 non-economic damages totaled 63 percent of the average total monetary value awarded by a jury. In 2002, non-economic damages totaled 92 percent of the average total monetary value awarded by a jury. (based on data from Cook County Jury Verdict Reporter)

• Examples of July 2003 ISMIE Mutual annual base rate increases for Illinois physicians with $1 million/$3 million coverage limits (base rates for other specialties available on request): *

Obstetrician

Metro Chicago; Metro East/St. Louis area: $37,000 increase (from $103,000 in 2002 to $140,000 in 2003)

Champaign, Springfield, Rockford: $28,000 increase (from $77,000 in 2002 to $105,000 in 2003)

Rural Illinois: $20,000 increase (from $57,000 in 2002 to $77,000 in 2003)

Neurosurgery

Metro Chicago; Metro East/St. Louis area: $60,000 increase (from $168,000 in 2002 to $228,000 in 2003)

Champaign, Springfield, Rockford: $46,000 increase (from $126,000 in 2002 to $172,000 in 2003)

Rural Illinois: $33,000 increase (from $93,000 in 2002 to $126,000 in 2003)

Internal Medicine

Metro Chicago; Metro East St. Louis area: $10,000 increase (from 26,000 in 2002 to $36,000 in 2003)

Champaign, Springfield, Rockford: $7,000 (from $20,000 in 2002 to $27,000 in 2003)

Rural Illinois: $5000 increase (from $15,000 in 2002 to $20,000 in 2003)

*These base rates do not take into account additional premium increases some physicians may experience this year due to elimination or reduction of selected ISMIE discount programs.