National Consumer Group Slams Insurer 'Tort Cost' Report

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Jan 28, 2010, 03:59 ET

NEW YORK, Jan. 28 /PRNewswire-USNewswire/ -- A major new analysis released today by the consumer coalition Americans for Insurance Reform (AIR) finds that a recent claim by the insurance consulting firm Towers Perrin (now called Towers Watson) that the U.S. tort system costs $254.7 billion is highly exaggerated and misleading, based on unverifiable and flawed work, and is completely inappropriate for evaluating the U.S. tort system. Even with its flaws and padded numbers, the Towers Perrin report, 2009 Update on U.S. Tort Cost Trends, still finds that tort system costs are growing slower than medical inflation, that medical malpractice trends are completely stable, that the U.S. tort cost environment is "relatively benign," and that costs are less today, compared to GDP, than they were in 1983.

AIR's critique, Towers Perrin: "Grade F" For Fantastically Inflated "Tort Cost" Report, is co-written by actuary J. Robert Hunter, Director of Insurance for the Consumer Federation of America (CFA), former Commissioner of Insurance for the State of Texas, and former Federal Insurance Administrator under Presidents Carter and Ford; and by Joanne Doroshow, Executive Director of the Center for Justice & Democracy.

Co-author J. Robert Hunter said, "It is really past time for Towers to stop publishing such flawed data year after year. The fact that they persist despite criticism after criticism shows a deep disdain for fair and accurate presentation of facts."

Joanne Doroshow said, "The Towers Perrin report gives no credence whatsoever to any notion that tort costs are out of line, particularly medical malpractice costs. Policymakers and opinion leaders should be extremely wary of how this document is used, because it is routinely presented in a misleading manner by corporate lobbyists who seek to weaken the tort system. Fear-mongering is typical, for example, as taxpayers are often misled to believe they are paying these inflated costs in the form of a 'tort tax' or 'litigation tax.' Yet the Towers Perrin report provides absolutely no support for such a contention, nor for the insurance industry's 'tort reform' agenda."

Among AIR's findings are:

Towers Perrin figures do not represent the costs of the legal system. For example, the report does not examine jury verdicts, settlements, lawyers' fees, or court costs.
Towers Perrin examines only insurance losses whether or not a lawsuit was filed, plus insurers "guess" (historically, widely overstated) of what future losses could be, plus all of the industry's bloated overhead (salaries, bonuses, lobbying costs, jet planes etc.).
Towers Perrin adjusts figures without any basis and fails to provide explanations or sources.
Towers Perrin entirely ignores the amount of money the civil justice system saves the economy in terms of injuries and deaths that are prevented.
Towers Perrin's calculations are not discounted one cent for the benefit that is gained from repairing damage.