The new Medical Indemnity Bill announced last week is intended to make it easier for medical practitioners to access affordable and adequate run-off cover. Assistant Treasurer Helen Coonan said the Government decided to amend the Bill to remove the more prescriptive elements relating to run-off cover.

“These provisions will be replaced with an ability to prescribe run-off cover requirements by regulation,” she said.

The move followed concern from medical defence oganisations (MDO) that the original draft of the Bill required them to make a compulsory offer of “run-off” cover for doctors. Senator Coonan said the Bill presented technical difficulties, including constraints in the commercial reinsurance market.

It seems there will be further changes to the Bill, with the Federal Government announcing it will commission a study of options to examine broader, longer-term retirement cover issues.

The Bill provides that the new prudential framework will take effect from July 1, and Senator Coonan believes it will get the go-ahead from Parliament in the current sittings. Under the transitional arrangements, MDOs will have five years to meet minimum prudential capital requirements. 

Australian Medical Association President Kerryn Phelps says the Bill hasn’t eased the “medical indemnity crisis”, but it has brought it to a head. She says the legislation may secure the MDOs, but it does little to ease the “insecurity and uncertainty” being experienced by individual doctors and their patients around Australia.

“Under the Government’s package, as it stands, doctors would be personally liable for ‘blue sky’ amounts awarded for claims over their insurance cap,” Dr Phelps said. “Some of the most respected specialists in the country may choose early retirement.”

Michael Herlihy, an associate director of ratings agency Fitch, says further “real reform” to liability laws is needed because Australians are becoming more litigious in their everyday lives and courts are awarding higher amounts.

Aubrey Whitear, Chairman of PricewaterhouseCoopers’ Asia and World Insurance Group in Australia, agrees that further tort law reform is the only logical way to combat the medical indemnity problem. He says once the issues are under control the industry will see an increase in insurance capacity.

Although Mr Whitear agrees that the Government needs to come up with a longer-term solution, he says there has been no choice but to keep the system running while tort reform is worked out.

Mr Herlihy says the medical indemnity situation is improving, thanks to the Government’s efforts. “Tort reform [and] the Government’s response to the liability problem – although it is early days – should bring long-lasting benefits to insurance companies and buyers,” he said.

Mr Whitear agrees the Government will eventually find a solution. “Medical insurance in Australia will recover, if only because there are too many vested interests for it not to,” he said. “The Government cannot afford a breakdown in medical services.”