Australia’s biggest medical insurer is in crisis, and the pundits are predicting another insurer collapse if an appeal for a Federal Government handout by June 30 fails.

United Medical Protection (UMP), which insures 60% of Australia’s doctors and 90% of the doctors in NSW, wants the Government to provide up to $100 million. Last month APRA gave UMP until June 30 to raise $30 million after its capital reserves fell below the minimum levels.

Even if the Sydney-based insurer gets assistance to meet its mid-year deadline, a second deadline that would require it to boost its reserves by another $100 million by 2004 could prove even more difficult. UMP Chairman John Quayle says a taxpayer funded bail-out is needed if the insurer is to keep its insurance operator licence beyond then. “We may reach that amount ourselves, but that would be a very tall task,” he said.

Dr Quayle said UMP will probably reach July 1 with the correct level of capital adequacy, “but it’ll certainly be touch and go”. He has not ruled out requesting Government assistance to raise the $30 million needed to nearly double its capital.

The medical indemnity crisis has been sparked by a number of recent shocks including last year’s changes to NSW health care legislation, investment losses and rising reinsurance costs in the aftermath of HIH and September 11, and a withdrawal of reinsurance capacity in global markets.

The increased number of cases where doctors are being sued for medical malpractice has sent indemnity premiums rocketing and already forced some doctors to avoid high-risk areas like obstetrics. The industry has suggested reforms such as capping medical malpractice payouts to alleviate the crisis.

A national summit on the issue will be held next month.