Alarm As Doctor Insurance Giant Told To Boost Reserves
Sydney Morning Herald
Thursday February 28, 2002
Concerns about the future of Australia's major malpractice insurer for doctors heightened yesterday when it was ordered to raise its capital reserves by $30 million by June.
The Australian Prudential Regulation Authority (APRA) said United Medical Protection, which covers 60 per cent of doctors, had to boost its insurance subsidiary reserves from $38 million to $68 million.
The money was required to ensure that United complied with the minimum requirements of insurance laws.
The watchdog recently stepped in to investigate United's insurance subsidiary after an alarming deterioration in its financial position.
That was caused by an $80 million increase in claims last year, investment losses and a record $14.2 million award against it in the Supreme Court.
APRA's intervention has raised new fears within the State Government and among doctors' groups about the viability of United, which has more than 39,000 members across Australia.
The organisation, which covers 90 per cent of NSW doctors, said last night that it believed the money coming in from premiums would be enough to cover the extra $30 million it needed.
But its chairman, John Quayle, warned that pressures on the medical indemnity industry meant that the present system was ``unsustainable unless radical reform is initiated at a federal level".
The industry wants legal reforms, like those introduced in NSW, which would reduce costs by limiting claims against doctors and capping payouts in medical negligence cases.
The Australian Medical Association said the announcement by APRA confirmed that the crisis in medical indemnity had ``reached a crescendo" and the Federal Government needed to step in.
Like many other insurance companies, United has suffered from the collapse of HIH and the terrorist attacks on the United States that increased re-insurance costs.
It said last night that the combined effect of these events had reduced its capital from $118 million at June 30 last year to $38 million on December 31.
After it raised its premiums by an average of 52 per cent late last year, the State Government took over the malpractice insurance costs for all doctors in the public system.
That decision alone is estimated to cost taxpayers about $200 million for past accidents or mistakes by doctors that have not yet been subject to claims.
The Government hoped that by taking over the liability it would relieve some of the pressure on United and allow it to drop its premiums.
The Federal Government, concerned by soaring medical insurance premiums over the past decade, has called a national summit in April to discuss the problem.
© 2002 Sydney Morning Herald
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