PM Transcripts

Transcripts from the Prime Ministers of Australia

Transcript 12841

MEDICAL INDEMNITY INSURANCE

Photo of Howard, John

Howard, John

Period of Service: 11/03/1996 to 03/12/2007

More information about Howard, John on The National Archive website.

Release Date: 30/06/2002

Release Type: Media Release

Transcript ID: 12841

I am today announcing further details of the Government';s response to the difficulties being experienced in the medical indemnity insurance market. The Government put in place temporary arrangements to avert a disruption in medical services when UMP/AMIL was put into provisional liquidation. Today I am announcing a substantial enhancement to the guarantee provided by those arrangements. I am also announcing proposals for dealing with unfunded incurred but not reported liabilities (known as IBNRs). These are a particular problem for UMP/AMIL. By dealing with these liabilities, the Government will pave the way for the development of commercially sustainable medical indemnity insurance arrangements. Key elements of the Government';s strategy for ensuring that medical indemnity insurance is made a viable commercial product have been identified. The UMP/AMIL difficulties have highlighted a number of serious problems in the market for medical indemnity insurance. The Government is determined to address these problems. Enhancement of guarantee The existing government guarantee only covers payments for claims finalised between 29 April and 30 June 2002, and incidents that occur between 29 April and 30 June 2002. The Government will offer a guarantee to the provisional liquidator of UMP/AMIL to enable him to:  meet claims notified in the period 29 April to 31 December 2002 under an existing (or renewed) claims made policy;  renew policies on a claims made basis for the period until 31 December 2002; and  continue to meet claims that were notified before 29 April 2002 and properly payable in the period 1 July 2002 to 31 December 2002 (this is an extension of the existing guarantee that was accepted by the NSW Supreme Court last week). Dealing with unfunded IBNRs The Government will establish a scheme to fund currently unfunded IBNRs. Details of the scheme are as follows:  The Commonwealth will assume liability for all unreported incidents that occurred under claims incurred policies, where there is not adequate provisioning for these liabilities. It will then recoup this liability from members of relevant MDOs over an extended period to spread payments and make them affordable.  All MDOs will be required to participate to the extent of their unfunded IBNRs. These amounts will be the subject of independent actuarial assessment.  The scheme will be funded by a levy on medical practitioners in those MDOs with unfunded IBNRs.
 Medical practitioners who belong to an MDO which has fully provisioned for its IBNRs will not be subject to the levy.  Details of the levy arrangements will be developed in consultation with affected medical practitioners and the MDOs, with the aim that: - levies will be affordable, with amounts funded over a period of at least five years; and - medical practitioners will be required to contribute to the funding of unfunded IBNRs in their particular MDO.  The scheme will also fund the extension of the guarantee to be provided to the provisional liquidator of UMP/AMIL, as set out above, to enable claims against practitioners to be paid. Longer term strategy The Government recognises that unless medical indemnity insurance can be made a viable commercial product, practitioners will not have the certainty they need to continue practising. This means that a number of serious problems have to be fixed. The Government has identified a number of proposals that would address these problems. Key elements of those proposals are as follows:  Seeking the removal of NSW legislative provisions that impede the development of a commercially based medical indemnity market by capping premiums for certain high risk specialties.  Developing arrangements, including consideration of direct financial support, to ensure premium affordability for doctors undertaking higher risk specialties.  Working with the States to develop a suite of mechanisms that will give insurers greater certainty in calculating the size of likely claims, and assist in pricing risk and setting affordable premiums. This will have to include: - substantial tort law reform to contain the cost of claims, reduce the need for litigation and encourage structured settlements rather than lump sums. I welcome the substantial progress in this regard at yesterday';s Ministerial meeting on public liability; - a range of measures to deal with the more serious, higher cost claims; - improved claims management; and - better clinical risk assessment.  Improving transparency in the financial reporting of MDOs and bringing all of the insurance business of MDOs into the prudential framework for general insurers. Next stepsI have instructed officials to develop the details of the longer term proposals outlined above in consultation with the States and Territories, medical practitioners and the Australian Medical Association, commercial insurers and the MDOs. It is the Government';s firm intention that a new comprehensive framework of measures will be in place before 31 December 2002.

Transcript 12841