The next insurance “solution” – this time for medical indemnity in the wake of the UMP collapse – comes from the Royal Australasian College of Surgeons. They want to abolish Australia’s five medical indemnity insurers and replace them with one giant fund.

The RACS suggested the creation of a single medical indemnity fund to cover the nation’s doctors beyond December 31, when the Federal Government’s guarantee to UMP runs out.

RACS President Professor Kingsley Faulkner said all five of Australia’s indemnity funds couldn’t survive much longer. “They lack the capacity to develop large reserves of cash and to spread their risk,” he said.

The new fund would use the pooled reserves of existing funds to be rolled over into one giant fund. “Pooling the risks, the reserves and the income in one fund has a better prospect for reasonably priced re-insurance and a better chance of withstanding major claims,” Professor Faulkner said.

Under the single fund, doctors would pay according to their risk level: high-risk neurosurgeons would pay more than GPs or doctors working in community health. The risk-based premiums would be paid over five years to ensure the fund’s commercial viability. It would generate about $500 million in premium income and become self-sufficient in three years. RACS also proposed that APRA could oversee the fund.