Exhaustive report analyses $4.5 billion of the hospital professional liability losses

CHICAGO, October 18, 2005 - While the severity of malpractice claims continues to rise – growing at a rate of 7.5 percent annually – the frequency of malpractice claims has decreased by one percent over the past year, according to the 2005 Hospital Professional Liability and Physician Liability Benchmark Analysis released today by Aon (NYSE: AOC). This is the first time in the history of the study the frequency trend decreased in claims for both hospitals and physicians.

Greg Larcher, assistant director and actuary of Aon Risk Consultants and author of the analysis explained: “We believe that legislative reforms in several states over the last few years are contributing to the reduction in claims. In addition, the medical malpractice availability and affordability crisis of the last several years has resulted in a rapidly growing alternative market. Healthcare systems now have a greater financial incentive to reduce their cost of risk.”

Added Greg Morris, chief operating officer of Aon Healthcare: “Actions taken by healthcare systems to improve quality of care and a heightened awareness of how quality care and patient safety tie directly to the cost of risk have also played a role in the decline.”

The comprehensive study examines more than 200,000 hospital bed equivalents and represents approximately 10 percent of the hospital professional liability market, and 15 percent of the alternative segment of the market, making it the largest analysis of its kind.

In total, the analysis database contains 53,000 non-zero claims, representing $4.5 billion of incurred losses, and includes historical claims information for 10 accident years (1995 to 2004). The study also includes breakouts of claim costs and frequency trends by facility type, including university, specialty, religious, publicly traded and community.