Doctors’ planned litigation against UMP is “unhelpful” and could put the insurance of hundreds of doctors insured by the group at risk, according to the Australian Prudential Regulation Authority (APRA).

Media reports say up to 400 doctors are involved in a class action, claiming they were misled by UMP and the liquidator. But APRA says UMP is “well on the road towards a full recovery” and litigation will only destabilise the medical indemnity industry. 

GM Enforcement Darryl Roberts said it would not be in the best interests of members if UMP was forced to close overnight. “This would simply leave other medical defence organisations dangerously over-stretched and many UMP members without any cover and unable to practise,” he said.

In a statement, APRA said UMP’s fortunes are “turning around”, and with the group steadily regaining capital it has “good prospects” of meeting APRA’s capital adequacy requirements before the industry deadline of June 30 2008.

Sunrise Exchange News talked to one medical indemnity insurance executive who said he was “appalled” that APRA and Dr Roberts had released the statement, which he believed was a private endorsement of a commercial business. “I think it’s disgraceful and utterly extraordinary that a prudential regulator should do that,” the executive said.

“We are still not talking about a collapse of a system – it’s just a corporate failure ­­–  and I find it extraordinary that we now have APRA saying UMP is brilliant.”

Despite the Federal Government’s bailout package, the medical indemnity market is still facing commercial difficulties, with many insurers opting to stay out of the market despite the Government’s enthusiasm for their participation.

The industry consensus is that it will be a while yet before the reforms work and the market becomes attractive to insurers.