Insurance facts and figures 2007 - PwC

and provides guarantees and assistance to enable them to meet their claims obligations.
With effect from 1 July 2003, only registered insurers, including those owned by MDOs,
are permitted to offer medical indemnity insurance. The legislation outlines the minimum
coverage that medical indemnity products must provide and stipulates that such products
must provide “claims-made” coverage. The legislation includes:
• transitional provisions for the improvement of the capital adequacy of MDOs;
• funding of half the cost of claims over $300,000 by the HIC;
• a premium support scheme, providing a subsidy to doctors with excessive
premiums; and
• a run-off cover scheme, providing eligible retired doctors coverage for claims at a
nominal cost. The run-off cover scheme is funded by a levy on the premiums
of medical indemnity insurers.
An independent review of competitive neutrality in the medical indemnity insurance
market was performed in early 2005. The review found that the specific assistance given
to United Medical Protection Limited (“United”) had resulted in a competitive advantage.
The review suggested that this arose because the Australian Government had taken
over all of United’s legacy commitments, allowing it, unlike other medical indemnity
providers, to concentrate only on the future.
The review recommended that to redress the balance it would be necessary for United
to make a series of regular payments to compensate the Government for assuming
its obligations. The Government accepted these recommendations and the first
contribution year started on 1 July 2005 and will end on 1 July 2014, although the final
year can be brought forward by regulations. Further, the payments the Government will
receive from United (termed “competitive advantage payment”) will be used to reduce
the payments doctors make under the United Medical Protection Support Payment
(UMP SP) scheme. Under the new arrangements, members’ payments will be reduced
by $1,000 annually. The number of contribution years will also be reduced from six to
four years.
The Government recently outlined possible amendments to the prudential and product
standards of the Medical Indemnity (Prudential Supervision and Product Standards) Act.
In 2006, Federal Treasury sought and received feedback about these proposals from
various industry bodies. Comment was sought on a range of topics, including:
• Implications of requiring APRA authorisation of entities indemnifying medical
practitioners, but not requiring this for entities indemnifying other healthcare
professionals;
• Whether the product standards targeted at employed medical practitioners were
necessary; and
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