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Review to ensure level playing field for medical indemnity insurers.



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No.019

MINISTER FOR HEALTH AND AGEING The Hon Tony Abbott MP and MINISTER FOR REVENUE AND ASSISTANT TREASURER

The Hon Mal Brough MP

Tuesday 7th December 2004

REVIEW TO ENSURE LEVEL PLAYING FIELD FOR MEDICAL INDEMNITY INSURERS

The Minister for Health and Ageing, Tony Abbott, and the Minister for Revenue and Assistant Treasurer, Mal Brough, today announced the Government would commission an independent review of competitive neutrality in the medical indemnity insurance market. The review will address concerns by some other insurers that the United Medical Protection (United) group of companies has achieved a competitive advantage as the result of the Government’s rescue package for the company.

When United went into provisional liquidation in 2002, the Government guaranteed its incurred-but-not-reported (IBNR) liabilities, estimated at that time at some $460 million. The Government rescue package allowed doctors who were United group members to continue to practice.

The decision to commission an independent review follows the announcement by United’s licensed insurer, Australasian Medical Insurance Limited (AMIL), that it will reduce its premiums significantly in 2005, along with other evidence that United’s financial position has recovered faster than expected.

“Lower insurance costs are good news for doctors and their patients and a sign that tort law reform, especially in NSW, and the Government’s other medical indemnity reforms may be having a positive impact on the availability and affordability of medical indemnity insurance. Even so, the Government is concerned to ensure that all medical indemnity insurers are operating on a ‘level playing field’," Mr Abbott said.

“It is an important principle that taxpayer funded assistance is not used to provide a competitive advantage to any one company,” Mr Brough said. “If this is occurring, the level of assistance clearly needs to be wound back.”

“We will be asking a suitably qualified independent person to examine the source and extent of competitive advantages in the industry, including whether they arise from Government assistance, to identify and evaluate options to restore a level playing field if necessary, and to report to the Government through us before mid March 2005,” said Mr Brough.

“The independent review will provide an opportunity for interested parties to formally present their views and will facilitate a thorough, considered response to this issue,” said Mr Abbott.

“This review will also ensure that competitive neutrality and pricing issues are considered in the context of our general policy aims of affordable and stable medical indemnity insurance.”

Medical indemnity insurers are subject to prudential supervision by the Australian Prudential Regulation Authority (APRA).

APRA will continue to monitor the viability and sustainability of all medical indemnity insurers and will require them to

meet their milestones for capital adequacy.

The Australian Competition and Consumer Commission (ACCC) is responsible for monitoring medical indemnity premiums to assess whether they are actuarially and commercially justified. It last reported in December 2003 and will report again this year and next year in detail.

Mr Brough said, “The ACCC will continue to provide advice to Government to ensure the viability and stability of the medical indemnity market on a fair, competitive basis, while maintaining the availability and affordability of medical indemnity insurance.”

The broader announced review of the effectiveness of the Government’s medical indemnity package and associated tort law reforms will proceed as planned in mid-2005. That review was announced as part of the Government’s response to the report of the Medical Indemnity Policy Review Panel in December 2003.

Kate Jordan 6277 7220 or 0417 425 227 (Minister Abbott’s Office)

Carlie Hogan 6277 7360 or 0408 960 905 (Minister Brough’s Office)

© Commonwealth of Australia 2000