Sunday, April 17, 2005


Malpractice Insurance Practices Destroying Small Town Doctors

If it is all about those evil trial lawyers, why are obscure Medical Malpractice Insurance practices destroying small town doctors?
The Insurance Scandal Shakes Main Street
Published: April 17, 2005
Tremors from the Reciprocal investigation would soon reverberate in the boardrooms of much bigger insurers. But as the inquiries into esoteric insurance practices spread, making their way around Wall Street, the fallout from some of the industry's abuses was already becoming apparent on Main Street. People who relied on Reciprocal, and held malpractice policies that evaporated without warning, say they feel betrayed by convoluted financial dealings that they barely understand.
Reciprocal's former chief executive, Kenneth R. Patterson, and a former executive vice president, Carolyn B. Hudgins, have already pleaded guilty to federal fraud charges. The Justice Department has been investigating other managers of the company and outside advisers since 2003. Insurance commissioners in Tennessee and Virginia, as well as former policyholders, have also sued the company and its advisers, accusing it of engaging in a protracted conspiracy to inflate the company's weakening accounts and to allow management to speculate with corporate funds.
IN a startling turn of events, the Reciprocal investigation produced information that led to the ouster of Maurice R. Greenberg, the iron-fisted chairman and chief executive of American International Group, the insurance giant.

Berkshire Hathaway, the holding company of Warren E. Buffett, acquired General Re in 1998. This January, as Berkshire lawyers scoured General Re's accounts to respond to Justice Department queries about Reciprocal, they disclosed a questionable insurance transaction that A.I.G. used to improperly spruce up its books.

Securities and Exchange Commission officials and Eliot Spitzer, the New York attorney general, were already investigating A.I.G. But the Berkshire disclosures led them to issue a fresh round of subpoenas to the company. The subpoenas, and evidence of financial manipulation that surfaced later, prompted A.I.G.'s board to ask Mr. Greenberg to step down.
Source: New York Times (Emphasis added)
If it was just one insurance company doing this, that's what Senator Chaffee would call an "isolated incident."

However, these abusive practices seem widespread. Bottom line: if their investments do well, insurance company executives pay themselves large bonuses, jack up rates, and spend whatever's left issuing PR reports about evil trial lawyers. If the investments tank, they STILL pay themselves large bonuses, jack up rates, and spend whatever's left issuing PR reports about evil trial lawyers


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