Insurance facts and figures 2007 - PwC

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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 162
Insurance legislation 6 • Whether regulatory flexibility in prudential supervision is necessary to allow the Government to respond to the market as it evolves or whether this would introduce uncertainty for medical indemnity providers. 6.2 State and territory legislation There is a range of state and territory-based regulations that complements the Commonwealth legislation including: • Workers compensation legislation; • Compulsory third-party legislation; • Privacy legislation; and • Fair trading legislation. 6.3 Industry codes GENERAL INSURANCE CODE OF PRACTICE The General Insurance Code of Practice is a self-regulatory code developed and administered by the Insurance Council of Australia (ICA) and approved by ASIC. An independent review of the Code was completed in November 2004, and in response a new General Insurance Code of Practice was released on 18 July 2005. The new code was designed to improve customer service standards in the Australian insurance industry and protect the rights of policyholders. All members of the general insurance industry are encouraged to adopt the standards set out in the code whilst ICA members are requested to adopt the code. The Insurance Ombudsman service (103) monitor and report on compliance with the code. Nearly all types of general insurance, from house to travel and multi-million dollar business insurance, is included in the Code. The only types of general insurance that are not included are reinsurance (insurance for insurers) and insurance that has specific rules under Government statute. The Code is intended to be a “living Code”, which will be progressively developed after consultation with Government and other interested groups. The Code will be reviewed every three years and any amendments will be subject to the approval of ASIC. 163
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Insurance facts and figures 2007
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Insurance facts and figures 2007
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4 Financial reporting 85 Developmen
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HIC HPPA IAA IASB IBD IBNER IBNR IC
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Introduction
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Industry information 1 Top 15 gener
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Industry information 1 Financial Po
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Industry information 1 Net Insuranc
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Industry information 1 Debt securit
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Industry information 1 General insu
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Industry information 1 Total privat
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Industry information 1 World catast
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Industry information 1 New annual p
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Industry information 1 Loss and exp
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2.1 Developments Developments over
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The requirements of these prudentia
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2.2 Framework Under the regulatory
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Although APRA is responsible for th
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2.3 Authorisation GENERAL INSURANCE
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authorisation, APRA can stipulate t
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AUTHORISED REPRESENTATIVES AND INSU
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Section 989B of the Corporations Ac
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• submits a Financial Information
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• A general insurer must develop,
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• The fitness and propriety of a
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LPS 232 - Business Continuity Manag
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Figure 2.2 summarises the calculati
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Insurance risk capital factors Tabl
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Table 2.6 - Counterparty grades Gra
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General insurers in run-off This ap
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The key requirements of the new sta
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The solvency requirement broadly co
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AS3.04 Capital Adequacy Standard is
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The resilience reserve is intended
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Funds held in a trust account can b
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If the reinsurance program has a co
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The Life Act also provides that cer
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3.1 Framework The insurance industr
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Table 3.1 - Policyholder protection
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• given a PDS before becoming bou
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With effect from 1 July 2003, only
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As AFSL holders, insurers are requi
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Since 2001, there has been a marked
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INSURANCE BROKERS Insurance Brokers
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4.1 Developments AASB 7 FINANCIAL I
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Australia had one of the leading-ed
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• it eliminates or significantly
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Figure 4.1 - Overview of relevant f
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10 core principles that the Council
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4.3 Accounting standards GENERAL IN
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• Non-insurance contracts; and
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value unless the claims are to be s
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Outstanding claims should have rega
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Interaction with regulatory reporti
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Life investment contract A life inv
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The income statement includes all p
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