The Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, today released the Australian Competition and Consumer Commission's (ACCC) first monitoring report on medical indemnity insurance.
The report analyses the costs, premiums and financial performance of medical indemnity insurers and assesses the actuarial and commercial justification of medical indemnity premiums.
“This report confirms that the cost of providing medical indemnity insurance has increased in real terms between 1998 and 2002 and that the major driver behind premium hikes was an increase in the cost of claims and reinsurance,” Senator Coonan said.
“In fact, the ACCC found that the ultimate cost of claims by year of notification increased significantly by around 276 per cent between 1997 and 2002. Reinsurance expenses as a proportion of gross subscription revenue increased from 30percent in 2000 to 52percent in 2002.”
The Government’s medical indemnity reform package developed over the past 18 months targeted claims and reinsurance costs through a range of measures including a High Cost Claims Scheme to meet half of claims costs exceeding $300,000 and on-going tort law reform.
“I have chaired six Ministerial Meetings on Insurance Issues with my State and Territory counterparts which have been marked with a spirit of non-partisan co-operation and an agreement to tort law reforms that will deliver significant benefits to the Australian community,” Senator Coonan said.
“At the next Ministerial Meeting later this week, I will be urging my State and Territory counterparts to further harmonise such reforms.”
The report was based on data received from insurers for the underwriting period following the start of the ACCC’s role on 1 January 2003. For four out of the five providers, this period runs 1July2003 to 30 June 2004, and for the remaining, from 1 January 2003 to 31 December 2003.
Senator Coonan said the ACCC had also found that the Government’s decision to move medical indemnity insurance in APRA’s regulatory framework was likely to level the playing field for possible competitors and reduce barriers to new players entering the market.
“By introducing these APRA administered prudential requirements across the entire medical indemnity industry, the Government addressed the serious risks associated with unregulated and sometimes under-funded medical indemnity providers," Senator Coonan said.
"While there appeared to be unlimited cover, the previous arrangements for medical defence organisations were unsustainable and did not guarantee that claims would be paid.”
The report is the first of three annual reports on this subject and is available from the ACCC's web-site at www.accc.gov.au