Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Medical Indemnity (Prudential Supervision and Product Standards) (Consequential Amendments) Bill 2003

Bill home page  


Download WordDownload Word


Download PDFDownload PDF

2002

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

 

MEDICAL INDEMNITY (PRUDENTIAL SUPERVISION AND PRODUCT STANDARDS) (CONSEQUENTIAL AMENDMENTS)

BILL 2002

EXPLANATORY MEMORANDUM

(Circulated by authority of the Minister for Revenue and Assistant Treasurer,

Senator the Hon Helen Coonan)



 



Table of Contents

Outline................................................................................................................. 1

Abbreviations....................................................................................................... 2

Financial Impact Statement................................................................................. 3

Regulation Impact Statement.............................................................................. 3

Proposed legislation............................................................................................. 4

Schedule 1 — Consequential amendments...................................................... 4

 



 



 

1

Outline

1.1   This Bill makes minor amendments to the Australian Prudential Regulation Authority Act 1998 (APRA Act), the Financial Sector (Collection of Data) Act 2001 (Collection of Data Act), the Insurance Act 1973 (Insurance Act) and the Insurance Contracts Act 1984 (Insurance Contracts Act).

1.2   On 31 May and 23 October 2002, the Prime Minister announced a comprehensive package of measures to address difficulties in the medical indemnity market.  These difficulties arise from a number of factors, including the financial position of UMP and its wholly owned subsidiary, AMIL.

1.3   A key part of this package was the announcement that MDOs would be brought into the regulatory framework administered by APRA and be subject to a range of prudential safeguards to mitigate insolvency risks. In addition, it was announced that medical indemnity products would be subject to product safeguards to ensure continuity of cover.

1.4   The amendments contained in Schedule 1 are consequential to the Medical Indemnity (Prudential and Product Standards) Bill 2002.  The measures as a whole are designed to ensure the long-term financial sustainability of the market for medical indemnity cover by requiring providers of medical indemnity cover to be authorised general insurance companies and to provide greater certainty to medical practitioners by imposing minimum product standards to ensure adequacy and availability of ongoing cover.

 



 

2

Abbreviations

The following abbreviations are used in this explanatory memorandum.

APRA

-

Australian Prudential Regulation Authority

ASIC

-

Australian Securities and Investment Commission

AMIL

-

Australasian Medical Insurance Limited

MDO

-

Medical Defence Organisation

UMP

-

United Medical Protection Limited

 



 

3

Financial Impact Statement

3.1     The proposed amendments have no financial impact.

Regulation Impact Statement

3.2     The amendments in Schedule 1 are consequential to the Medical Indemnity (Prudential and Product Standards) Bill 2002.  The impact of these proposed amendments is assessed in the regulation impact statement contained in the Explanatory Memorandum to that Bill.

 



 

4

Proposed legislation

Clause 1 — Short Title

4.1     Upon enactment, the Act will be known as the Medical Indemnity (Prudential Supervision and Product Standards) (Consequential Amendments) Act 2002 .

Clause 2 — Commencement

4.2     Clause 2 provides that this Act will commence on 1 July 2003.

Clause 3 — Schedule(s)

4.3     Clause 3 states that each Act that is specified in a schedule to this Act will be amended or repealed as set out in the applicable items of that schedule.

Schedule 1 — Consequential amendments

Australian Prudential Regulation Authority Act 1998

Item 1 — Subsection 56(1) (after paragraph (f) of the definition of Act covered by this section)

4.4     Section 56 of the APRA Act sets out the general secrecy obligations of APRA in dealing with protected documents given or produced to APRA or protected information disclosed or obtained by APRA for the purposes of an act administered by APRA.  This item includes the Medical Indemnity (Prudential Supervision and Product Standards) Act 2002 as an Act to which section 56 would apply.

 Financial Sector (Collection of Data) Act 2001

Items 2 and 3 — Subsection 5(2) and after section 5

4.5     Subsection 5(2) of the Collection of Data Act sets out the entities covered by that Act. Item 2 replaces the current definition of a financial sector entity to include a corporation to which section 5A applies. Item 3 inserts a new section 5A. Section 5A makes it clear that the Collection of Data Act would apply to an entity which provided medical indemnity cover prior to 1 July 2003 by a means other than by a contract of insurance (such as a Medical Defence Organisation (MDO) that provides medical indemnity cover on a discretionary basis).

Insurance Act 1973

Item 4 — After subsection 12(3)

4.6     Section 12 of the Insurance Act sets out the circumstances under which APRA may authorise an applicant to carry on insurance business in Australia.  This item inserts a new subsection 3A. Subsection 3A will prevent an entity that has liabilities relating to medical indemnity cover provided by a means other than that of a contract of insurance prior to 1 July 2003, from being authorised under the Insurance Act (such as an MDO with legacy liabilities as a result of the discretionary cover provided by the MDO).

Items 5 — 11 — Subsection 115(1), after 115(1), subsection 115A(1), paragraph 115A(2)(a), subparagraph 115A(3)(a)(i), paragraph 115A(3)(b), subsection 115A(6)

4.7     Section 115 of the Insurance Act sets out the circumstances in which APRA or a person authorised by APRA may require the production of information, books, accounts or documents from a general insurer or inspect those documents.  Section 115A sets out the circumstances under which an authorised person can access the premises of a regulated entity for the purposes of ascertaining whether a general insurer is complying with the Insurance Act or the Collection of Data Act.

4.8     Items 5 to 11 amend these provisions so that APRA can require the production of information, books and documents or access the premises of a regulated entity for the purposes of determining compliance with the Medical Indemnity (Prudential Supervision and Product Standards) Act 2002 .

Insurance Contracts Act 1984

Items 12 — 17 — Before section 11A, section 11B, subsection 11C(1), subsection 11D(1), Paragraph 11E(a)

4.9     These items amend sections contained in Part IA of the Insurance Contracts Act. Part IA sets out the administration provisions of that Act.  The amendments extend the application of the administration provisions to provide ASIC with powers to administer the Medical Indemnity (Prudential Supervision and Product Standards) Act 2002 .