An Australian Competition and Consumer Commission (ACCC) report into medical indemnity insurance ­– prompted by Prime Minister John Howard’s 2003 commitment to assess if premiums are commercially justifiable – has found they are set at the right level.

The first of three reports into the industry over a three year period found the premiums of four of Australia’s five medical indemnity insurers are justifiable.

ACCC Chairman Graeme Samuel says the fifth, Health Professionals Insurance Australia (HPIA), didn’t supply enough information on its pricing techniques.

“The Australian Prudential Regulation Authority has been advised of the problems the ACCC encountered with HPIA,” Mr Samuel said.

He says the report will provide some answers for doctors, who have successfully campaigned on the issue for the past year.

Mr Samuel says it’s too early to say if financial services reforms, which start on March 11, will have any effect on strengthening the sector and attracting new participants.

“Raising capital through pricing is only one of a number of ways insurers could satisfy their minimum capital requirements,” he said.

“Generally, the medical indemnity sector expects strong profits to be generated over the next five years, a turnaround from previous years of poor performance.”   

The report confirms that the cost of providing medical indemnity insurance has increased in real terms between 1998 and 2002, and that the major driver of premium hikes was an increase in the cost of claims and reinsurance.

Claims costs increased about 276% between 1997 and 2002, while reinsurance expenses as a proportion of gross subscription revenue rose from 30% in 2000 to 52% in 2002.