The Australian Government has today issued a new report by the Australian Competition and Consumer Commission into medical indemnity insurance, Medical Indemnity Insurance Monitoring Report December 2003. This is the first of three reports on the medical indemnity industry to be produced by the ACCC over the next three years.
The report is in response to the Prime Minister's announcement in October 2002 that the ACCC would monitor medical indemnity premiums to assess whether they are actuarially and commercially justified.
The ACCC found that premiums were actuarially justified for four out of the five current indemnity providers. The remaining provider, Health Professionals Insurance Australia Pty Ltd (HPIA), did not provide sufficient information about its pricing approach. Therefore, the ACCC could not make a judgement about whether its premiums were actuarially justified.
"Further information from HPIA would have greatly assisted the ACCC", ACCC Chairman, Mr Graeme Samuel, said. "The Australian Prudential Regulation Authority has been advised of the problems the ACCC encountered. The ACCC expects HPIA to provide more detailed information in future monitoring reports".
The ACCC report notes in its actuarial assessment that the overall premium pools of insurers were considered adequate to cover projected costs.
The ACCC also found that, in the current market environment, premiums set by all five providers were commercially justified. This assessment recognised the need for insurers to raise adequate capital to meet new prudential requirements set by APRA that ensure that they have the financial capacity to continue underwriting medical indemnity insurance.
"These findings provide some answers for doctors, their patients and the Australian Government about medical indemnity premiums which generally reflect costs and the commercial imperatives of the industry", Mr Samuel said.
He noted, however, that the medical indemnity industry is in a state of transition and it is too early to say whether recent regulatory and other reforms will strengthen competition and attract general insurers to the sector. The ACCC found that premiums currently contain a capital loading as insurers seek to comply with regulatory requirements.
"Raising capital through pricing is only one of a number of ways that insurers could satisfy their minimum capital requirements. Generally, the medical indemnity sector expects strong profits to be generated over the next five years, a turn-around from previous years of poor performance".