Evidence In Georgia Shows
The Journal Is Right

In the 1990s, insurers in Georgia, including MAG Mutual, followed the national pattern and kept rates artificially low, as they tried to undercut other insurers and write as many policies as possible so that this capital could be turned into investment income.  In Georgia, MAG’s own internal data shows malpractice premiums actually dropped more than 40% from 1988 to 2000.

As Georgia’s Insurance Commissioner, John Oxendine, recently alluded to at a seminar when he discussed the malpractice premium increases in Georgia, the fact is MAG did too good of a job in chasing off the competition.  In addition, St. Paul, the second largest insurer of doctors in Georgia, withdrew from the national medical malpractice market.  This occurred for reasons completely unrelated to Georgia, but instead due to gross mismanagement and St. Paul’s ill-fated acquisition of American Continental/MMI, which unexpectedly increased its reserve requirements overnight by hundreds of millions of dollars. 

Thus, Georgia has been left with too few carriers.  MAG’s marketing techniques, along with questionable business practices by insurers, forced many companies and other established insurers to either leave the market or adopt these irresponsible practices.  Once insurers' investment income began to slump, improper claims management and under priced coverage forced them to raise rates considerably and to restrict coverage or leave the market.  The insurance companies would not be in this position had they simply priced their product appropriately and not been so hungry for investment income.[66] 

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