In what some industry officials say is another sign that the liability insurance crisis is nearing an end, a group of 10 companies announced yesterday that insurance coverage would be available once again for most of the country's certified nurse-midwives.
The move will be one of several instances in which companies recently have resumed coverage for groups and businesses who have had difficulty obtaining insurance in the past two years.
Earlier this month, for example, Fireman's Fund Insurance Co. said it would start selling liability insurance once again to school districts and municipalities in Alaska and Connecticut, while Aetna Life & Casualty Co. said it would start sales again for New York municipalities. And in recent months, insurance officials say, a number of companies have started providing insurance to day-care centers, another group with highly publicized insurance problems.
"The great liability insurance crisis of the mid-1980s is over," said Robert Hunter, head of the National Insurance Consumer Organization and a harsh critic of the industry.
Other industry officials were more cautious, but they agreed with the general thrust of Hunter's remarks that the crisis in availability of insurance is starting to recede.
"The major dilemma we have seen for our clients has been to find available coverage at any price," said Robert H. Moore, senior vice president of Alexander & Alexander Services Inc., one of the country's largest insurance brokers. "There does seem to be the early stages of a market softening. It is incrementally loosening, and we expect that to continue in the general area of liability."
Moore and other industry officials stressed that liability insurance remains very expensive and difficult to obtain for many groups, and that it may take another year for the market to fully recover.
They also said adequate coverage will continue to be virtually impossible to obtain in a number of areas as companies fear the risk of insuring the service or product can not be quantified because of the uncertain legal environment. This would include insurance for certain professionals, pharmaceutical firms, chemical firms and other businesses that deal with hazardous substances.
The liability insurance crisis has become a major political issue in states around the country, as groups and businesses have complained of skyrocketing premiums and difficulty in finding adequate coverage. In more than three dozen states, legislatures have adopted reformed liability laws, which insurers and businesses charged have opened them to increasingly costly lawsuits and judgments.
Some insurance officials said this week that passage of so-called "tort reform" in some states was responsible for the limited reentry of some firms into the liability markets, and that further efforts of this kind will spur an easing of the market.
But others said the eased availability crunch was more a result of the natural cycle of rising and declining profitability that characterizes the insurance industry.
Industry experts said highly competitive companies cut their rates too dramatically in the first part of the decade, and hence did not have enough reserves to cover claims. The resulting massive underwriting losses eroded their capital base, which regulators use to determine companies' ability to sell insurance.
In response to these losses, insurers in the past two years have enacted massive rate increases of up to 500 percent in an effort to regain profitability. The price increases are enabling insurers to take on new business for the first time in several years, industry officials said.
For midwives as in other groups who lost coverage, the return of insurance is welcomed, but they also will be paying at least twice as much for reduced coverage.
"The market is recovering. We've had two years of double-digit rate increases in liability lines. If the rates are not at adequate levels, they're at least close to it in most lines," said Leslie Cheek, vice president for federal affairs at Crum & Forster, the insurance subsidiary of Xerox Corp.
"From this point forward, you'll see steady improvement in the availability of virtually all forms of property and casualty insurance, except for these virtual uninsurable lines," Cheek added.
A number of officials argued that further tort reforms are needed to limit the ability to win expensive judgments in lawsuits to restore balance to the market -- and to entice back many of the overseas insurance syndicates that have shunned the American market. The existence of this large "reinsurance" market was previously critical to the ability of insurance companies to offer large sums of coverage to businesses and others.
"Until they see tangible results for tort reform, they are not going to want to come back into this market," said Ira Malis, who follows the insurance industry for Alex. Brown & Sons in Baltimore.