Does your medical indemnity insurance actually cover you?

Incision Indemnity
General -
30th March 2023
6 mins read

Medical Indemnity Insurance – Do you know what you are covered for?

If you are with one of the major traditional unregulated Medical Defence Organisations (“MDOs”) these generally provide medical indemnity as a purely discretionary benefit of membership. Do you know what “discretionary” actually means? It means that the cover they provide to you is at the discretion of that MDO and that you may well find that you are not covered. One of the major MDOs decided that they would unilaterally stop all cover for spinal surgery a few years ago leaving their members in significant trouble.  Regulated insurance companies provide medical indemnity through a contract of insurance. This article explains why discretionary medical indemnity is not fit for purpose, and why doctors and surgeons should choose regulated insurance for their medical indemnity right away.

In 2018-2019 the Government held a consultation – “Appropriate clinical negligence cover: a consultation on appropriate clinical negligence cover for regulated healthcare professionals and strengthening patient recourse“. The UK government (HMG) stated in February 2019 that its preferred option was to replace the existing discretionary indemnity arrangements with regulated cover. This was a powerful indication of the fundamental inherent weaknesses in discretionary cover, and that it is not suitable for modern private medical practice.

HMG has now published a summary of the consultation responses at HMG has not yet formally stated its own opinion or recommendations on the future of medical indemnity. But the responses from doctors, surgeons, indemnifiers, lawyers, the public and others truly lay bare the scale of concern about the flaws in discretionary cover.  It is hoped that HMG will soon radically overhaul medical indemnity for private work.

HMG’s own express concerns about the traditional discretionary medical indemnity included:

  • The cover is discretionary – i.e: it is not fit for purpose because there is no guarantee that claims will be covered, and there is no way to force the MDO to cover a claim
  • Discretionary indemnity providers have no legal obligation to ensure they have financial reserves to cover the cost of claims – i.e: it is not fit for purpose because any MDO could simply run out of money and be unable to pay proper claims
  • MDOs do not have to disclose their full financial position, so doctors cannot assess the risk of their MDO being in a poor financial position and failing to pay claims – i.e: the lack of financial transparency makes it not fit for purpose
  • MDOs are not subject to regulation on financial conduct and fair treatment – i.e: it is not fit for purpose because an MDO is not obliged to treat their members fairly, and a doctor has absolutely no recourse if they are treated unfairly by an MDO.

By contrast, regulated insurance medical indemnity is modern and fit for purpose because:

  • The cover is contractual, certain and enforceable, through the Financial Ombudsman Service and also through the Courts
  • All insurers are subject to strictly enforced financial solvency standards. Insurers have to regularly prove to the regulator that they have enough cash to pay all potential claims
  • All regulated insurers have to disclose their financial position to the regulators – and insurers are also publicly rated for their financial health by the rating agencies (Moody’s, Standard & Poor) so anyone can assess in advance their ability to pay claims
  • All insurers are obliged to comply with the regulator’s rules and standards about treating customers fairly, and to have proper transparent processes for resolving disagreements
  • Insurance customers are entitled to use the Financial Ombudsman service (by statute a highly ‘customer friendly’, quick and free service) to resolve any disputes that cannot be resolved by the insurer’s own complaints processes

The Government’s latest publication helpfully provides a breakdown of the consultation responses. There were a few respondents in favour of the Government’s “Option 1” (leave arrangements as they are), but unsurprisingly, self-interest meant that most of those were the MDOs themselves.

The overwhelming majority of respondents were in favour of “Option 2” (legislate to ensure that all medical indemnifiers are subject to regulation and oversight by the Financial Conduct Authority and the Prudential Regulation Authority). This is also unsurprising – why would any doctor or surgeon knowingly choose a purported medical indemnity arrangement that in reality can decline cover on a whim or just run out of cash entirely? Why would any doctor or surgeon knowingly put their patients at risk of not being able to recover compensation for a justified claim?

In our view discretionary medical indemnity should not be allowed to survive. In light of the concerns expressed by HMG and the overwhelming consultation response that things cannot stay as they are, we trust that HMG will be legislating to reform medical indemnity as soon as practicable. This process takes time, and after legislation is introduced there may also be a transition period for the new rules.  Should legislation change stopping discretionary insurance MDOs may technically be able to continue as they are for a while until any new rules come into force.

Until then discretionary indemnity providers are potentially facing an existential threat, and may be forced to spend huge amounts of time and money preparing to meet new (to them) requirements. This could cause more uncertainty within some MDOs – causing less willingness and ability to pay claims.

It would probably be sensible for doctors and surgeons to purchase regulated insurance medical indemnity as soon as they are able. Continuing with discretionary cover as a benefit of MDO membership seems unnecessarily risky given the formidable challenges that MDOs will face. By contrast, the regulated insurers will face minimal change and disruption as their regulators will be monitoring their financial health and requiring them to treat customers fairly as usual. Now more than ever, regulated insurance medical indemnity is the safest option.

Incision indemnity provides only regulated contractual medical indemnity insurance, and works only with insurers with the best financial strength ratings. Incision indemnity provides a 24/7 medico-legal advice service staffed by dual-qualified doctors and lawyers. It has the largest cover offered to its clients and the longest run-off period of cover, provided at no cost, beyond retirement to all members.

Incision Indemnity

March 2023

Medical Indemnity Insurance