A new medical indemnity insurance framework: further measures

In my statement of 23 October 2002 (attached), I announced a comprehensive package of measures to address rising medical indemnity insurance premiums and ensure a viable and ongoing medical indemnity insurance market.  Today I am announcing some adjustments to the government's package.  This follows further consultations with relevant stakeholders on the design of individual initiatives.

The government has established a scheme to provide direct financial support for practitioners undertaking high-risk specialties - obstetricians, neurosurgeons and GPs performing procedures - who pay relatively high premiums.  I am today announcing that the government will increase the direct financial support available to obstetricians in rural and regional areas in recognition of their high insurance impost relative to their obstetrics income.  This measure is designed to help maintain obstetrician services in rural and regional areas.

The financial support for obstetricians in rural and regional Australia will be increased from 50 per cent to 80 per cent of the difference between the cost of their premiums plus their contribution to the IBNR Scheme (if applicable) and the corresponding cost for gynaecologists in the same income band in the relevant State and Territory.
The government is committed to comprehensive prudential regulation of medical defence organisations (MDOs), so that doctors and the community can have certainty that claims will be met.  After extensive consultations with MDOs and medical practitioner groups, the Medical Indemnity (Prudential Supervision and Product Standards) Bill 2002 will proceed to Parliamentary debate as soon as possible.  The Bill will deliver increased certainty for medical practitioners and their patients that claims will ultimately be met.  It provides this protection by prudentially regulating the MDOs under the same standards as general insurers, and by requiring that medical indemnity cover is offered as a legally binding contract rather than as a vaguely defined promise. 

The Bill provides that the new prudential framework will take effect on 1 July 2003 and MDOs are working to meet that deadline.
Under transitional arrangements, MDOs will have up to 5 years to meet minimum prudential capital requirements.

Medical practitioners have traditionally paid for their retirement cover throughout their working life, but changes in the reinsurance market over the last decade mean that increasing numbers of medical practitioners have to purchase retirement cover at the time that they retire.

The Bill provides product standards, including to ensure that minimum levels of retirement cover are available.  The government acknowledges the concerns of medical practitioners who do not expect to retire for many years that these arrangements may not go far enough in ensuring the availability of affordable and adequate retirement cover.  I am announcing today that the government will commission a study of options to examine the retirement cover issue, in consultation with the AMA and MDOs.

Passage of the Bill and implementation of the prudential framework will complete passage of legislation underpinning the medical indemnity package.  Implementation of the measures in the package is well progressed.  The NSW Supreme Court has approved the extension of the Commonwealth government's guarantee to UMP until 31 December 2003; this has allowed UMP to continue to process claims and to renew policies.  Moreover, the Provisional Liquidator recently announced the formation of an advisory committee in preparation for UMP possibly coming out of provisional liquidation.

The Commonwealth will continue to work with the States and Territories to enhance clinical risk management and to progress tort law reforms, which should also improve the affordability of medical indemnity cover over time.

In addition, the Government intends to provide transitional arrangements to MDOs from the disclosure and licensing requirements of the Financial Services Reform (FSR) Act.  Importantly, this will mean that MDOs will have until 11 March 2004 to comply with the FSR regime.  The disclosure requirements under the FSR Act, combined with the provisions of the Bill that ensure a minimum level of information is provided to doctors about their policies, will mean that medical practitioners taking out indemnity cover will be provided with the information they need to know to understand the product they purchase.

Background on the government's medical indemnity package is available from the Medical Indemnity Information Phone Line on 1800 007 757 and the Department of Health and Ageing's website at www.health.gov.au

19 March 2003

Further details are available from:

Robert Lawrence, Media Adviser, Office of the Minister for Revenue and Assistant Treasurer (prudential regulation, product standards, retirement cover and Financial Services Reform Act) (0438 690 305).

Randal Markey, Media Adviser, Office of the Minister for Health and Ageing (rural obstetricians) (0417 694 520).