Commonwealth insurance bodies would be abolished, Comcare’s underwriting outsourced and doctors would lose medical indemnity premium subsidies under proposals by the Audit Commission.

The commission’s report into Federal Government finances recommends scrapping the Australian Reinsurance Pool Corporation, the Export Finance and Insurance Corporation and Defence Services Homes Insurance, whose policies are underwritten by QBE.

It says Comcare’s claims management function should be outsourced and insurers should be able to underwrite the Commonwealth’s workcover scheme.

The Natural Disaster Relief and Recovery Arrangements would also be replaced by grants to states for each major natural disaster.

The Government was handed the two-volume report in February and March. It underpins some of the proposals rumoured for next week’s federal budget.

The report says governments should not be insurers of first resort and the community should not expect a risk-free life.

It argues the premium support scheme and high cost claims scheme for medical practitioners should be dropped and grandfathering provisions introduced while subsidies to medical indemnity insurance are scaled back.

“Following the collapse of HIH Insurance and United Medical Insurance in the early 2000s, the Commonwealth has subsidised indemnity insurance premiums and provided assistance with high-cost claims,” the commission says. “There is now evidence that the market is normalising.”

Also see ANALYSIS