What do I need to know about choosing indemnity?

Choosing the best indemnity can be a complex process. Insurance is an important subset of this decision but few healthcare practitioners have the time or enthusiasm to read documents cover to cover for every provider before making an informed choice. As individual circumstances vary, a generic shopping list may not suit everybody.

We’ve prepared this article to help MIPS members and prospective members understand how to ensure that their individual indemnity needs are best met rather than perhaps what the seller thinks is best for them.

MIPS’ approach has always been one of informed choice.

Our 'members first’ not-for-profit ethos, direct interaction with members and refusal to seek or receive commissions or pay commission or salary performance incentives to MIPS staff means that there are no perverse incentives with the potential to undermine MIPS acting in the best interests of its membership.

MIPS members’ comprehensive indemnity is provided through a combination of insurance and non-insurance covers. Ongoing development is carefully considered to ensure simple, flexible and comprehensive protection appropriate for each member’s professional stage of life. The membership fees members are charged reflect independent expert actuarial advice. In that way MIPS is confident that it is not sacrificing long term member security for short term market gain. Membership fees must be fair to individual members and equitable for the membership.

We’re here for the long-term and as a mutual, we’re not interested in making profits from members – simply providing benefits now and, importantly, over the professional life of our members.

#1 Learn what ‘claims made’ policies are and what retroactive or tail cover means

Cover under a claims-made policy differs to a claims-incurred policy. Professional indemnity for health professionals in Australia is offered under  claims-made insurance policies. Under claims-made the relevant policy cover (insurance) for an incident is triggered when the claim  made against you is notified to the insurer and accepted by the insurer. It is not triggered by the date of the incident.

Each MIPS member under our claims-made indemnity insurance policy and discretionary MIPS Protections nominates a retroactive cover date. Members are able to seek indemnity for claims that emerge from incidents after this retroactive date.

It’s important to understand this because the cost of indemnity cover is likely to be higher if you need a retroactive cover date that is further in the past. The cost of cover should also reflect the type of practice that was undertaken during this time and where it was undertaken as types of practice and geographic locations differ in risk.

If those factors are not being taken into account an individual may be paying more than their fair share (to cover other higher risk insureds) or less than their fair share (others paying more for their risk).

It is important that everyone pays for the risk they bring otherwise it is either at best unfair or at worst not sustainable over time.

MIPS’ membership fees are calculated based on a member’s practice over the previous three years and the year ahead – a retroactive cover date of more than three year’s prior won’t increase your membership fee.

Example: Claims under both claims made and claims incurred policies

Retro-Active-Tail-Cover-Diagram

#2 Ensure any comparison includes the same retroactive cover (tail cover)

If you are considering your indemnity options be sure to compare offersthat have the same retroactive dates. This is important because quotes may only refer to practice for the single year ahead, and not the full exposure to claims that are yet to arise from your prior practice in Australia. To provide a fairer and more accurate quote MIPS requests your history for the three previous years and the year ahead. You should and can only really compare quotes with the same retroactive cover date and cover for the same prior practice type/s and geographic location/s during that retroactive cover period.

In Australia, almost all non-employer indemnified cover prior to 2001 was provided on a claims-incurred usually discretionary/non-insurance basis. If you practiced before then, there may be little benefit in obtaining retroactive cover with a date prior to 1 July 2001. It is important to remember that where an insurance policy and non-insurance discretionary cover apply to the same matter the insurance policy must respond (but only in accordance with its terms and conditions).   

#3 Understanding civil liability

Legal jargon can sometimes cloud understanding of indemnity. A simple way indemnity insurance is sometimes framed is: “That’s the insurance you need when somebody sues you”. This is true, however, protection should be broader than just cover for being sued. The indemnity insurance that MIPS and other healthcare indemnity providers offer is largely for legal defence costs and civil liabilities. In general terms any person is Australia has the right to take civil proceedings to obtain redress from another person, for example when a patient sues a doctor alleging a healthcare injury. Under the MIPS Members’ Indemnity Policy, this is referred to in the sections ‘Healthcare compensation cover’ and ‘Cover for investigations and proceedings’. As well as an insurance policy MIPS members can also seek indemnity under MIPS Protections for non-medical indemnity matters that are not covered by insurance that arise from their professional practice.

The ‘non-insurance’ safety-net cover of MIPS Protections is automatically provided to members under a unique MIPS Financial Services Licence. Unlike insurance MIPS Protections are not limited to or by a pre-determined shopping list of scenarios and exclusions but fall under the general objects of the MIPS Constitution.

#4 Find out if you are employer indemnified

Thiscould be the biggest factor in how much your indemnity could cost. If your employer provides your indemnity, then membership with MIPS or any other provider is only intended to cover what your employer doesn’t, eg coroner’s court matters, Good Samaritan cover.

If your employer provides your indemnity, then you can obtain MIPS membership with an ‘Employer indemnified’ basis, which means you’ll pay a lower membership fee than if you were providing the same healthcare in private ‘non-employer indemnified’ practice.

It is important to determine your indemnity status with your prospective employer before you take a job.

#5 Be wary of limits disguised as benefits

MIPS provides a simple annual $20 million overall insurance limit for each member. In addition to the $20m insurance limit there is no pre-set cover limit under MIPS Protections. However many insurers apply sub limits for claims particularly in relation to legal costs or defending certain matters such as a Coroner’s investigation, disciplinary board proceedings or criminal matters.

In some cases limits seem to be promoted as benefits, eg cover for “x” for up to a sub-limit of “$xxx,000”, which might lead the reader to think there is actually more cover available for such matters in addition to the overall policy limit, where in fact it actually means much less cover for such matters than the stated overall limit . The danger is that when there is a sub-limit in place it is possible that the insured health practitioner can be significantly out of pocket even though the overall policy limit amount has not been reached.

To illustrate this consider a health practitioner's Board matter costs $1m in legal fees. The health practitioner holds a $20m indemnity policy but unfortunately because there is a $500,000 sub-limit they will need to pay the additional $500K from their own pocket.

MIPS does not have any such sub-limits for cover under its indemnity policy or MIPS Protections.

#6 Identify ancillary benefits that aren’t core indemnity and consider their value

It is an old sales technique to unpick and list individual ‘features’ in the hope that ill-informed or time-poor individuals will select the offering on the basis of the length of the list rather than a true understanding of what is ‘necessary and important’ through the ‘nice to haves’ to the ‘of no material benefit’.

Indemnity providers may list a whole range of benefits that are not directly related to professional indemnity needs. The likelihood of claiming on these benefits is low, which is why indemnity providers can offer them at little cost. A more troubling situation is if the benefits cover areas of moral hazard (behaviours that are not in the community’s best interests), ie cover is more likely to be sought after by those who may think they are more likely to use it.

MIPS automatically provides members with their membership category associated entitlement to an extensive range of ancillary benefits in addition to the cover provided under its liability policy.

These benefits include a range of insurances including Personal Accident including travel insurance, Practice Entity and Cyber Insurance as well as Clinico-legal advice, MIPS Protections and CPD.

You may notice that MIPS’ insurance policies and the range of other non-insurance membership benefits focus on core healthcare indemnity purposes and emphasise clinico-legal advice and support. This is important because in the real world the number of contacts from members in respect of claims each year is a fraction of the overall number of clinico-legal advice calls.

A good question to ask yourself is whether you think an indemnity provider will be able to provide the full range  of clinico-legal support and advice in the event of a claim, investigation or complaint against you? After all, this is the most important part of indemnity insurance or any medical defence organisation membership.

#7 Is the clinico-legal advice and support a high standard?

If you’ve have had to call your current indemnity provider were you happy with the service provided? Did you get to speak to an experienced healthcare practitioner (ie a peer) that understood the clinical nature of the issue?

MIPS members speak to experienced health practitioner clinico-legal advisers who are available 24/7. Such high-level timely advice can make all the difference. For example would you prefer to be a patient with a serious and urgent health issue attending an Emergency Department where you cannot speak to a senior clinician until you have exhausted levels of administrative hurdles (if ever) or an ED where the most experienced and expert clinicians are at the triage desk?

At MIPS, clinico-legal calls and  written contacts are addressed  by experienced practitioners with both healthcare and legal knowledge. We feel these professionals are best placed to understand our members' concerns and if your matter requires appointment of a legal representative, then they help to ensure that the most appropriate and expert legal resources for the issue are sourced.

#8 Are you taking advantage of the CPD program?

If you embark on a career in private practice you will need to independently maintain your CPD to meet registration and college requirements and to ensure that you continue to develop and expand your clinical horizons. However this requirement can be costly for practitioners working in independent clinical practice outside of the hospital system. MIPS offers workshops and webinars free to all members. MIPS education is accredited with the RACGP, ACRRM and RACS.

It is important to consider this membership benefit because not all insurance providers offer such education and some may provide webinars while others may charge additional fees for education.

MIPS provides workshops in capital cities in twice yearly programs and webinars throughout the year. Taking advantage of these can reduce the costs of obtaining your CPD and improve your practice.

#9 Understand some important indemnity terms

MIPS believes that it is better for clarity and comprehension if there is as little use as possible  of what people consider industry industry jargon.

However, you may come across some of these terms.

Difference in conditions

This refers to a common commercial practice where an insurer accepts a previous insurers broader insurance cover when you take up the new insurers policy. It only applies where you change insurers. Generally, you must provide the new insurer written evidence of the previous policy. This may only provide some benefit where there is a significant gap between the new and old policies. If you are moving to a stronger policy in all aspects, then there is no benefit, however, if you know you are moving to a weaker policy then this may provide some benefit.

Unfortunately it is easy to see how there can be delay’s and worse in responding to a claim notification if the claim relates to a benefit under a previous cover rather than the current insurers wording.

The Difference in conditions approach also means that the new insurer may have little real feel for the risk exposure it is actually accepting especially when the risks are presented to them by intermediaries who do not hold the risk but earn a percentage of the premium charged.

MIPS provides a highly comprehensive range of insurance and non-insurance covers and does not use intermdiaries.

Continuous cover

Some insurers may promote a ‘continuous cover’ clause that provides cover for claims arising from circumstances that you knew about but that you failed to notify your previous insurer about . However, it is important to carefully consider this feature because exclusions placed on these clauses could make them essentially redundant and the circumstances for a claim to be covered rare and improbable.

MIPS does not use this language in the MIPS Members’ Indemnity Policy but does provide cover from a member’s retroactive cover date for unknown and therefore unreported matters .

All indemnity insurers will deny claims for prior known claims or incidents.

Other less common reasons for denying claims are fraudulent misrepresentation/disclosure or where the incident was previously covered by another insurer. In these cases, an insurer’s liability may be reduced by any prejudice suffered, potentially to nil.

Reinstatement

Each insurance policy has a limit of liability. In some cases, the policy may also offer one or more ‘automatic reinstatements’ of that limit.

For example, if you had a policy with a $5 million limit of indemnity, and the policy contained one automatic reinstatement the policy would provide cover for claims aggregating up to $10 million. The risk with this approach is that if a policyholder has a claim in excess of $5m that they (the individual policyholder not the insurer) are liable for the amount above $5m even if the total claim is less than $10m.

MIPS’ policy provides one simple limit of $20 million in aggregate for all claims during the period of insurance. This means one or more claims within the period are covered whatever their individual value but subject to the aggregate ie total value of all claims being less than $20 million.

If you are a dental member,  AHPRA registration requires you to have at least one automatic reinstatement.  Because of this requirement MIPS provides dental members with a limit of $10 million, plus one automatic reinstatement to provide a total limit of $20 million in aggregate for all claims.

Legal defence or defence costs in addition

‘Defence costs in addition’ may be promoted as a benefit but in reality it is simply a limit. Some insurers place a limit on the total indemnity policy then place either a sub-limit for defence costs or a further amount and limit for legal defence costs. Typically these sub-limits are far less than the total cover limit of the indemnity policy.

MIPS uses one simple overall limit of $20 million and any defence costs are counted within this limit. We find this is easier for members to understand, easier to administer and provides the best possible protection for members.

Criminal proceedings and statutory defence costs

In indemnity insurance, ‘statutory defence costs’ provides cover for defence of matters prosecuted  under a statute for a civil offence. Common examples include offences under the Competition and Consumer Act 2010 (Cth) (Competition and Consumer Act) and the ASIC Act 2001 (Cth).

Criminal proceedings refers to the legal costs in defending a criminal matter.

Exclusions relating to intentional, reckless and grossly negligent conduct of the policyholder are usual.

Whether indemnity under the policy applies is often uncertain and may be contested. That is because a policyholder may expect that cover will be granted however there are often complicated and time-consuming investigations and considerations in respect of individual claim circumstances that need to be taken to ensure that the insurer is not "legally prohibited" from providing cover.

Criminal sanctions are imposed for a number of reasons, including retribution, deterrence and rehabilitation.

Indemnity for statutory and criminal offences may be regarded as a "moral hazard" that reduces the incentive for individuals to behave in accordance with the law.

In practice in respect of alleged sexual, harassment, sexual misconduct or unlawful discrimination, MIPS will provide you support, investigation and defence costs where you deny the allegations but will withdraw this if you are charged with a criminal offence.

 If subsequently, proceedings against you are dismissed/dropped or you are found not guilty, MIPS will consider reimbursement of reasonable defence expenses.

#10 Consider your other insurance policies and what they cover

It is unlikely you want to insure the same risk twice. Under Australian law you can’t claim twice with two different insurers for a stolen car and the same rule applies to your indemnity cover.

You may find that some risks are already covered through a Practice business insurance policy you may have or even the extended benefits of your car or home insurance. The reason this is important when picking an indemnity insurer is that you may find that the ancillary insurance benefits they offer are already covered under other insurance policies you have, making them redundant.

Importantly, if you have obtained MIPS’ Practice Entity and Cyber, Privacy and Media cover then you have those extended benefits that other providers may put under a policy of a different name.

#11 Ensure certainty of communicable diseases cover amounts

MIPS provides Communicable diseases cover for students and recent graduates. The cover entitles a  payment of $25,000 for a single event. MIPS also offers further benefits through the MIPS Members’ Personal Accident Policy including death benefits, cover for Permanent loss of healthcare practitioner board registration due to injury/sickness, funeral expenses, credit card protection and travel insurance.

The information on this page is a summary and of a general nature. It does not take into account your personal and healthcare practice or needs. You should consider the appropriateness of the information and read the Membership Benefits Handbook Combined FSG and PDS before making a decision on whether to join MIPS.

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