Push on for medical framework

MEDICAL indemnity insurance is facing sweeping changes as the Federal Government and the medical defence organisations (MDO) seek a solution to the burgeoning crisis.

One of the most crucial issues for MDOs and the commercial insurance groups, which have shunned this area of insurance, is the development of a level playing field for all the providers.

The Federal Government has recently had talks with the Insurance Australia Group (IAG), which includes SGIO, SGIC and NRMA.

The Government asked IAG to outline some of the major barriers to entering the medical indemnity market.

NRMA head of communication Wayne Burns said the major problem for commercial insurance groups was that the MDOs were not governed by the prudential super-vision as insurance companies.

“We are of the strong view that to have a viable and sustainable market all the players need to be treated the same,” Mr Burns said.

IAG isn’t currently involved in any medical indemnity insurance.

“We’ve become a player because the Federal Government came to us as the largest and leading general insurance and asked what it would take for us to write this business,” Mr Burns said.

“Our response was to [that] to start with we would need a level playing field.

“At the moment the different States have different regulations.

“We all need to be singing from the same song sheet.”

There are a number of factors that have ignited the problems in the area of public liability, he said.

“The price [increase] of re-insurance is one of the main reasons,” Mr Burns said.

“Over the past 10 years there’s been an explosion in smaller claims in the class of personal injury and public liability.

“In public liability the legal costs represent one third of the total cost of a claim.

“That’s a very high figure. For other classes, such as compulsory third party, it’s about 6 per cent.”

He said a study by the media group Zenith in Queensland revealed that the advertising spend of law firms increased from $560,000 in 1999 to $1.632 million in 2001.

WA has one of the strongest MDOs in Australia, however Medical Defence Association WA president Dr David Watson believes any solution to the problems in the area of medical indemnity needs to include the embattled United Medical Protection (UMP).

Dr Watson met with representatives of the Federal Government and State MDOs this week to discuss medical indemnity.

“It’s no secret that for 100 years the MDOs have provided the bulk of medical indemnity in Australia,” Dr Watson said.

“At no time have commercial insurers ever provided more than 5 per cent.

“One of the reasons why the market has never been level is that the MDOs were never regulated.”

It’s not just a new regulatory framework that’s required to deliver stability for the market, the definition of negligence would need some close attention, he said.

“What the lawyers are doing is slowly relaxing the definition of negligence, Dr Watson said.

“And there has to be some attention directed towards limiting the statute of limitations.”

The period of the statute of limitations varies between the different States.

In WA the statute is six years, whereas in Tasmania it’s only three years with a three-year extension for children.

The bill for lifetime care is one of the most contentious areas for both the MDOs and the commercial insurance groups.

“There is a serious question about how [lifetime care] will be funded,” Dr Watson said.

“There’s a powerful argument to remove these claims from the norm tort group.”

Dr Watson said he expected a number of these issues would be put to parliament in October this year.

“Federal Government has said it’s prepared to make certain the biggest of the MDOs can continue to exist and trade out of trouble,” he said.

“UMP has to be part of the solution and, in the short term, the commercial insurers won’t come back in.”

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