Amendments to the Medical Indemnity (Prudential Regulation and Product Standards) Bill 2002 announced today will remove the more prescriptive elements relating to run-off cover, and allow greater flexibility.
The Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, said Medical Defence Organisations (MDOs) have indicated that the current drafting of the Bill, which would require MDOs to make a compulsory offer of 'run-off' cover for doctors, presented some technical difficulties.
"These technical difficulties include constraints in the commercial reinsurance market."
Senator Coonan said the Federal Government has acknowledged the concerns of doctors about the availability and affordability of appropriate run-off cover for doctors upon retirement.
"In recognition of these concerns, the Government has decided to make an amendment to the Bill to remove the more prescriptive elements relating to run-off cover. These provisions will be replaced with an ability to prescribe run-off cover requirements by regulation," Senator Coonan said.
"It is the Government's intention to regulate in advance of the July 1, 2003 commencement of the Bill to require that appropriate interim "run-off" cover is offered to medical practitioners, consistent with conditions in the reinsurance market and the type of cover that MDOs are able to offer."
"This amendment will allow greater flexibility in specifying the type of run-off cover that must be offered," Senator Coonan said.
The Prime Minister announced last week that the Federal Government will commission a study of options to examine broader, longer-term retirement cover issues, particularly in relation to cover for medical practitioners who may not retire for many years, to supplement the minimum standards allowed for under the Bill.
This study will proceed as a matter of urgency in consultation with the Australian Medical Association and MDOs.
The Federal Government is determined to ensure that workable arrangements are put in place to enable medical practitioners to access affordable and adequate run-off cover. It is committed to examining all options in this area as a high priority.
The Government is committed to ensuring that medical indemnity is provided in a safe and sustainable framework.
The Medical Indemnity (Prudential Regulation and Product Standards) Bill will:
- replace the current, unregulated, discretionary nature of medical indemnity with a more secure prudentially regulated and contractual basis.
- deliver increased certainty for medical practitioners and their patients that claims will ultimately be met.
The amended Bill will provide this protection by prudentially regulating the MDOs under the same standards as applied to general insurers, and by requiring that medical indemnity cover is offered as a legally binding contract rather than as a vaguely defined promise.
The Bill provides that the new prudential framework will take effect on July 1, 2003 and MDOs are working to meet that deadline.
Under transitional arrangements, MDOs will have up to 5 years
to meet minimum prudential capital requirements.
Senator Coonan said "It is essential that the Bill be passed by the Parliament
in the current Parliamentary sittings to remove any remaining uncertainty for
MDOs transitioning to the new requirements."
"The Federal Government is very aware of the importance to doctors of adequate and affordable retirement cover. With these amendments, it is not stepping away from providing product safeguards for retirement cover. Rather, there needs to be some further consultation on the shape of those safeguards to ensure they are both deliverable by MDOs and meet the needs of doctors".