The Assistant Treasurer, Chris Bowen, today released the Australian Competition and Consumer Commission's (ACCC) sixth and final monitoring report on medical indemnity insurance premiums, giving them a clean bill of health.
The ACCC has been conducting informal price monitoring on medical indemnity premiums to assess if they were actuarially and commercially justified as part of the 2002 medical indemnity reform package.
This was in response to the provisional liquidation of United Medical Protection in 2002, which resulted in a lack of indemnity cover for many doctors and significant increases in medical indemnity premiums.
As part of the reform package, the ACCC was asked to monitor medical indemnity premiums for three years to assess whether they were actuarially and commercially justified. In 2006, this monitoring was extended for a further three years.
The ACCC report shows a continuation of the trend over the last several years of lower average premiums in real terms, lower premiums for most specialty medical insurance in real terms and a more viable financial position for insurance providers.
The sixth report covers the 2007-08 financial year and the key findings include:
- real average medical premiums fell for the fifth year in a row, to $5,392 in 2007‑08, a reduction of 15.5 per cent from the previous year;
- premiums charged by the five medical indemnity insurers were actuarially and commercially justified; and
- net assets for the medical indemnity industry increased to $619 million in 2007-08, an increase of 17 per cent from the previous year.
"It is pleasing to see the medical indemnity industry bringing down average premiums over the last five years while becoming more financially sustainable," Mr Bowen said.
In particular, the report found that insurers' capital levels had significantly improved since 2003–04, attributable to transitional capital adequacy requirements set by the Australian Prudential Regulation Authority (APRA).
In that time, the industry has moved from providing discretionary medical indemnity cover through not-for-profit medical defence organisations to non-discretionary medical indemnity insurance contracts through insurance companies regulated by APRA.
From 1 July 2008, the ACCC's informal monitoring role and the transitional capital requirements will cease and medical indemnity insurance will be subject to full prudential regulation by APRA.
"The ACCC's monitoring has provided valuable assurance to doctors and their patients of affordability and stability in medical indemnity insurance during this time of transition," Mr Bowen said.
Copies of the report are available on the ACCC website.
Chart 4.6 Average premium-real terms, 1999-2000 to 2007-08
