What happens if discretionary indemnity is banned?

The Department of Health and Social Care has published a report entitled "Appropriate clinical negligence cover - a consultation on appropriate clinical negligence cover for regulated healthcare professionals and strengthening patient recourse".

 

You can find it at: https://www.gov.uk/government/consultations/appropriate-clinical-negligence-cover. The consultation closes on 28 February 2019 and focuses on indemnity cover for healthcare professionals (including surgeons) who have to purchase their own medical indemnity cover because they are not covered by state-backed schemes.

At present those healthcare professionals are obliged by their regulator to hold a 'suitable' indemnity arrangement, and have the choice to obtain that indemnity from one of the traditional Medical Defence Organisations (MDOs) or from a Medical Indemnity insurer regulated by the Financial Conduct Authority (FCA).

The consultation’s introduction states that: "There are concerns that the current arrangements held by healthcare professionals who are not covered by state-backed schemes could prevent patients getting appropriate compensation and put healthcare professionals at risk of being personally liable for the costs of claims. This is because these arrangements [through the MDOs] are mostly discretionary, where the providers are not contractually obliged to meet the costs of any claim and are not subject to prudential or financial conduct regulation."

The consultation seeks views as to whether this arrangement should be allowed to continue, or alternatively whether a change in legislation is required to require healthcare professionals who are not covered by any state-backed scheme to hold cover that is regulated – in other words, insurance cover from an FCA-regulated insurance company.

The consultation seems likely to generate a large number of responses reflecting widely different views – not only from the MDOs and insurers themselves, but from healthcare professionals who rely on their indemnity arrangements, or insurance cover, if they are unfortunate enough to have a negligence claim made against them. However, some commentators, such as the Independent Healthcare Providers Network have already been reported as saying that discretionary cover is "simply not tenable".

So what if those commentators are right, and the upshot of the consultation is that the government introduces legislation requiring healthcare professionals to purchase insurance rather than membership of an MDO that comes with discretionary indemnity cover? What are the implications for healthcare professionals who currently have their indemnity arrangements with an MDO?

Joanne Staphnill, Partner at DWF LLP commented:"In my view one of the main implications for healthcare professionals would be the need for education on quite a large scale. In my work as a clinical negligence defence lawyer, and provider of medico-legal and insurance notification services, I very regularly work with healthcare professionals who have been indemnified through an MDO membership for their whole career, and have recently moved to insurance cover with a regulated insurance company. Those healthcare professionals very often need extra help and guidance in understanding the differences between their obligations under their previous MDO membership, compared with the obligations that arise under their new insurance policy. There is a whole new terminology to get to grips with – particularly the technicalities of ‘Claim’ and ‘Circumstance’. And there may also be something of a 'culture shock' when it comes to understanding why it is so important to insurers that potential problems get 'notified' to the correct policy year. On an individual basis it is very easy to provide that help and guidance, but the challenge for the insurance industry would be to be sufficiently prepared for a potentially large and sudden influx of new customers that would all need that sort of assistance."

Ian Redbourn, Head of Healthcare and Life Science at Incision Indemnity, said:

“Since we began providing insurance schemes in 2010, through various conversations with our Incision members, it has become apparent that surgeons in the UK are unaware of the unregulated and discretionary elements of the MDO membership and we are amazed that, to this day, we’re still having these discussions. Most are shocked when they understand how vulnerable discretionary cover leaves them with absolutely no recourse. “We support and welcome this consultation and we are available to assist with anyone moving from long-term MDO membership to insurance. At Incision Indemnity, our insurance policy is written in plain English, there is a well-established medico-legal and notification helpline service on call to answer individual questions, and a suite of guidance notes to help with the adjustment from a 'discretionary cover' mindset to an 'insurance policy' mindset. “Incision members have very broad coverage and the highest limits available in the current market, with each individual having the option to be insured for up to £40m aggregate limit.“

The world of healthcare professionals' indemnity arrangements might be about to have a major sea change that will have direct implications for thousands of self-employed surgeons. This consultation highlights the shortcomings of unregulated and discretionary coverage and it would be prudent to explore the advantages of an insurance contract sooner rather than later.