The Federal Government has pledged its support to medical insurer United Medical Protection after exhaustive talks and some heavyweight medical lobbyists finally convinced the Treasury there was no other way to prevent the company falling over. Now UMP has a capital guarantee to ensure that its subsidiary Australasian Medical Insurance can meet its APRA prudential margins.

APRA warned the struggling insurer last month that it must increase its consolidated capital from $38 million at December 31 to $68 million by June 30. But the bad news didn’t stop there. After raising the extra funds, UMP then had to find $100 million before the end of 2004.

This time around APRA was on the ball and had a good idea of the likely outcome, with CEO Graeme Thompson indicating the rest of the medical indemnity industry is looking healthy enough and telling the Australian Financial Review last week: “Just shutting the doors is doomsday sort of  stuff and is a highly unlikely outcome.”

The Government bailout is good news for doctors and the medical indemnity industry with the nation’s biggest medical insurer being kept afloat in the short term. UMP Chairman John Quayle said there are longer-term issues to be tackled by the whole insurance industry.

One of those is the struggle to find an affordable solution to the “incurred but not reported” (IBNR) issue. Dr Quayle said there are other countries where doctors have withdrawn services because they were unable to meet the growing burden of indemnity costs.  

“The current situation with record awards for medical malpractice claims and an increasing number of claims means that this class of insurance is untenable,” he said. 

AMA President Kerryn Phelps welcomed the move but called for a national care and rehabilitation scheme for victims of medical accidents. “More payments like the [recent] $17 million to cerebral palsy sufferer Calandre Simpson will make insurance ‘untouchable’ and doctors will simply be unable to practise medicine because of the risks,” she said. 

A medical indemnity summit will be held in Canberra later this month.